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Power
Sector Reform in Bangladesh
The power sector reform problems mostly originated from the 'lack of
local ownership of the reform process'. DESA, DESCO and the Power Grid
Company of Bangladesh (PGCB) were formed under donor pressure and
these never performed up to expectation. Much of the reform process
over the last 15 years has been donor driven and has, thus, remained
insensitive to the political realities of the country. The government
will have to recognise the political cost of a malfunctioning power
system with insufficient capacity to meet the public demand for power.
Created under pressure from donors, DESA had been the biggest
liability of the sector with a Tk three billion debt to PDB. BPDB is
suffering from inefficiency and corruption and at the same time, it is
not getting the Atmosphere to become efficient and corruption-free.
BACKGROUND :
At
the time of partition of India in the year 1947, Power Generation and
distribution of this part of the country were in the hands of some
private companies.
The
power supply to 17 districts was within the township in a limited way.
Power used to be supplied to most of the district during the right
time only and the supply voltage was 400 volts. Only exception was
Dhaka City where power used to be supplied by 2 Nos. of 1500 KW
generators and the generation voltage was 6.6 KV and this was the
highest distribution voltage.
Besides,
power used to be generated by some industries and railway workshops.
With all these the total power generation capacity in the country was
21 MW. The generation capacity of the power utility companies together
was only 7 MW and there was no transmission system.
Electricity
Directorate was created in the year 1948 in order to plan and develop
power supply situation of the country. After the creation of WAPDA in
the year 1959, and in 1960 Electricity Directorate was merged with
WAPDA started working as a statuary organization. The pay structure of
WAPDA in course of time was also higher than the Government
Organization. The higher separate pay structure continued even after
the creation of the new independent state Bangladesh in the year 1971.
After liberation the new pay scale was announced and the same pay
scale was formulated for both statuary and Government Organization.
EPWAPDA was bifurcated into two autonomous Boards under an Ordinance
(P.O. 59 of 1972). Bangladesh Power Development Board (BPDB) was
solely entrusted with responsibility of Power Generation, Transmission
and Distribution of electricity through the country.
POWER
SECTOR REFORMS
Power
sector of Bangladesh is now in a period of transition. So long
development of infrastructure like power was the responsibility of the
Government. It was more essential for countries like Bangladesh where
only 16% of the total population so far has access to electricity. The
country is naturally very far from the take off position to meet the
challenges of 21st Century.
Power
Sector Reform Policy was approved by the Government where the
recommendation was to run the Generation and Transmission (G&T) as
one entity. Reform and restructuring of power sector was imperative,
as it was not functioning effectively. Reform of every country does
not taken up in the same way. It should neither be taken up as per
policy prescription of the donors, but according to the need of the
society. For this reason it is imperative to undergo through public
hiring to analyze the different aspect to find out the best possible
solution. As part of the reform program, private power policy was
approved by the Government in the month of October, 1996. Incentive
package in terms of exemption of Tax and VAT on imported capital
machinery and equipment, spare etc. is being offered to the
Independent Power Producers (IPP). But the incentive package was not
offered to BPDB. As a result, from the very inception of restructuring
the utilities the existing system won’t be able to complete with the
IPPs. In fact, the competition should be like for like. Steps need to
be taken to make the existing Generation Sector healthy for the
greater interest of the people of the country. It is necessary to
think some factors, particularly the social obligation. The more
realistic example is that the cost of generation of electricity in the
Western Zone is about 6(six) times than that of the east. BPDB
maintains the same tariff structure throughout the country. But
Government does not replenish the excess operating cost to BPDB for
maintaining the same tariff. In fact, from the very beginning, there
was no vision of the policy planners make the system healthy and
effective.
BPDB
sells power to DESA and REB at a cost lower than the average cost of
generation of energy.
As
part of the social obligation BPDB is to run gas turbine plants based
on costly liquid fuel during off peak hours to meet the irrigation
load. This is a positive contribution to the country’s economy
considering Bangladesh as agrobased economy. In fact it is necessary
to take more time for discussion in order to doe the right and to get
a good result from the reform process.
As
part of the social obligation when International Oil Price fluctuates,
Government does not change the electricity price. But in case of IPPs
the purchase power of energy will increase with the increase of fuel
price. In any case there has to be some form of social commitment for
the benefit of the common people.
In
any case the reform must bring benefit to the customers and will make
the system efficient. The weaker links need to be identified and
appropriate measures are to be taken with accountability in each type
of the weaker system. Selling of power is a monopoly business. In this
situation losses in the system cannot be acceptable. With proper
accountability public or private sector basically are the two sides of
the same coin in our country. In order to improve the system, strong
Government commitment is necessary.
Trade
Unions under different political banners instead of looking into the
welfare of the employees engaged themselves keen to work as a tail of
structure. As a result interference even in day to day management
affair has deteriorated the system more quickly. Donors even took
interest to discuss with the trade union leaders to influence then to
implement their ideas. There was no justification to interfere in the
areas, where the utility and the Government should have the domain. In
fact this kind of activities have deteriorated the administrative
condition of BPDB and DESA to an unacceptable level. Due to undue to
interference of the trade union leaders, it was impossible for the
officials who sincerely desired to implement the ideas of the
authority in order to improve the situation, may be they are very
small in numbers. Eventually, it is hard to believe how the situation
deteriorated in Govt. Organization that is being operated at the cost
of the people.
Traditionally,
Bangladesh is attracted to foreign loans and more attracted for import
to utilize these loans. It matters little to the policy makers whether
these loans will be beneficial to the country and the people. PGCB was
created as a precondition to receive the 9th Power Sector Loan of ADB
despite Cabinet decision to keep Generation & Transmission system
to develop and operate as one entity. There is no justification to
separate the transmission system first as a first step of separation
of Generation, Transmission and Distribution system in the concept of
vertical configuration.
THE
DISTRIBUTION SYSTEM
As
part of the reform program distribution sector is to be addressed
first as most formidable part of the reform program, where the end
users have direct access to electricity as a customer. Bangladesh
Power Sector having very high losses in the distribution system, more
precisely theft and pilferage of energy at the end users level are the
root causes of mismanagement of the entire power system.
The
unfair deal between electricity supplier and a significant number of
customers have taken the management to such a position, that unless
radical reforms and restructuring are taken up in this sector, it
would be very difficult to pay the Independent Power Purchase (IPP)
bills. Bangladesh Power Development Board has already signed Power
Purchase Agreement (PPA) with some IPPs and some are under process of
negotiation. First IPP, Khulna Power Company (110 MW) has started
supplying power to the National Grid. So, unless money is not
collected from the customers in time, Government will have to pay
bills to IPPs from National exchanger.
Eventually, there will be a mismanagement and crisis in financial
sector of a trade deficit country like Bangladesh.
In
this situation, emphasis has to be given, how the sick distribution
system can be restructured in the context of environment of this
country. Here, strong Government commitment can only save the
situation. In the context of changing world economic scenario, it is
not realistic to continue to accept a situation which is unhealthy and
totally unacceptable.
On
the other hand there is no justification to separate generation from
transmission at this moment. Rather, there was no necessity except the
necessity of the donors to fulfil their desires and objectives.
Many
important issues have to be analyzed before the system is ready for
changes. These include a) Maintaining system reliability and customers
service b) Maintaining of social and low-income program in the form of
tariff, particularly subsidized agricultural tariff and domestic
tariff for the vernerable customers of the society c) Safety, security
and expansion of the existing system etc.
One
most important issue is that, any reform of the existing system should
bring benefit to the customers, not sufferings. We have experienced
the effect of sudden creation of DESA which could neither contribute
to the welfare of the customers nor helped to strengthen the financial
position of the utility itself. Rather it is now in a verge of
collapse. In fact the changes was made without any firm objective and
vision.
THE
POWER GRID COMPANY OF BANGLADESH
It
is well known that losses in the distribution system is beyond any
acceptable limit. There is no direct customer in the high voltage
transmission system. The transmission system developed as per
International Standard and the transmission losses is only 3-4%. So
there is no justification to create PGCB at this moment in the name of
restructuring in vertical configuration.
Before
restructuring it is necessary to evaluate first its necessity before
steps are taken to implement it. It was quite logical to keep the
generation and transmission system together. The investment
requirement in Generation, Transmission and Distribution is 45%, 15%
and 40% respectively. Moreover to develop a power plant, transmission
system needs to be associated with it so that these can be developed
simultaneously for evacuation of power.
Traditionally,
Bangladesh is attracted to foreign loan and more precisely for import
of equipment and materials to utilize this foreign loan. PGCB was
created as a precondition to receive the 9th Power Sector Loan of ADB.
In this situation it is necessary to cite some examples of
restructuring of power sector of some states of USA.
The
basic principle of restructuring of electric supply industry of USA is
a clear evidence of benefits to the citizen of the state should be
shown prior to any electric industry restructuring. The benefits are
in terms of lower price (tariff), enhanced services, increased
economic efficiency and innovation.
For
all this, a commission works and public hiring is made and written
comments are solicited to evaluate the pros and cons of the reform.
So,
the question arises, what was the necessity of creation of PGCB and
for whose benefit. The transmission system was running with only2400
employees and majority of then are professionally developed. The
necessity was to strengthen the transmission system operation with
proper relay co-ordination of the system along with generation system
protection. It is of no use to introduce wheeling charge in the
transmission system which ultimately will increase the tariff of the
end users and against the concept of restructuring. In the name of
vertical configuration, where there was no problem and so no
necessity. The country is small and transmission system is also not
huge.
Before
any form of restructuring, there should be a workshop and public
hiring and recommendation in writing about the benefit of
restructuring. These need to be evaluated by an independent body who
will justify and qualify the benefits of restructuring for the greater
interest of the nation. No more we can afford to go ahead with trial
and error method and burden our economy with foreign debt to implement
the ideas of donors in association with the thinking of some
microscopic personality of one society. The evaluation must highlight
the impact of changes to the electric industry in terms of costs,
rates and reliability of service structure after meeting the social
obligation.
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