ANGLADESH Is facing serious power shortage because of system loss and theft which is at an endemic 40 per cent resulting in her inability to invest in improving transmission and distribution or to increase generation capacity.

While the solution thrOugli controlling system loss' and theft is political and long term, increasing power generation can indeed be achieved in a very short time. In that scenario lesser investment will be required in transmission also.

Power generation has not increased as the present and past governments were made to believe that very large generation units such as 350 MW and 450 MW are solutions for the country. This is in fact not true because of the following rationale:

• The capital, credit and experience required for such large projects are never available in Bangladesh, and as such only multinational companies can develop these projects.

• As a consequence, these projects require at least five years to implement.

• The foreign invesmrx .md debtors require their । G-- < nt in foreign currencies bin.lining the treasury of the < ountry.

• Multinational companies perceive Bangladesh as high-risk investment and therefore require higher return (profit) thus increasing the power generation cost.

• Centralised large power generation plants require a very high investment in transmission and distribution of generated electricity.

• In international tenders for large projects Bangladeshi companies cannot participate as they do not posses experience for such large projects.

The demand pattern and load curve of electricity in Bangladesh shows a 40 per cent difference between peak and off peak hours. Large generating units with continuous production are not flexible enough to handle this kind of load curve, resulting in Inefficiency. (Graph-Annexure I)

Probable Solution

Alongwith large power generating plants Bangladesh should have decent tallsed power production in smaller units of 20-50 MW lli< arguments In favour of the soluflor are as follows.

• Each plant of 20-50 MU will cost about 10-25 mllllor US dollars which can. In addition to foreign investors, be un dertaken by entrepreneurs oi Bangladesh.

♦ As a consequence, the gov-

eminent of Bangladesh will be able to buy electricity in local currency (Taka).

• This yvill allow indigenous private sector to retain profits locally, fr6m power generatioii The local banks will also have better loan portfolio and earn interest.

• Once these companies float their stocks in the stock market. which is in doldrums, it may get a boost from quality shares.

• The implementation period for small power plants is one year and as such is imple-mentable before the next peak season.

• Small units are flexible to the local demand curve, as such units can be shut on and off easily, bringing in efficiency.

• Technically, some may argue that larger combined cycle plants are more efficient in using gas at 52 per cent efficiency and therefore have an economy of scale. This again is not a valid argument, as today smaller units are available at quite high efficiency. In fact comparative unit cost of different independent power producers (IPPs) show smaller power plants to be cheaper in the long run. (Graph-Annexure II).

• The price of gas should be reasonable in Bangladesh therefore plant efficiency is less of a concern.

• Bangladesh government has already decided and is implementing gas transmission and distribution network including the western region of Bangladesh, which can be effectively used by these smaller power generation plants avoiding parallel transmission of enerp’.

• The transmission and distribution losses of electricity are high when using large combined cycles. This can be eliminated by implementing small-decentralised power plants.

• Small plants can be built in the mouth of gas well and provide electricity to rural people.

• Implementing smaller plants bring a sense of belonging to the rural people and will help Implement the project and the customers will be more willing to pay.

• System loss In our villages are low, REB's system loss Is 16 per cent compared to national average of 40 per cent , smaller power projects will serve this category more.

In view of the above. 1 believe generation can be increased

substantially within a very short period by implementing the following measures:

Rural Electrification Board , (REB) has to tender 10-20 MW projects for the high demand areas with available gas connections.

• Government should offer a 300-crore Taka infrastructure fund loan through nationalised banks which would be repaid directly by the government's power purchasing authority i.e. BPDB and REB through assigned bills. These funds will be available only to companies quoting rates in Bangladesh Taka.

• United States dollar appreciates on an average 7 per cent vis-a-vis Bangladesh Taka per annum, whereas Bangladesh interest rates are usually 7% higher than United States interest rates. Therefore if Taka rates are 7 per cent higher on debt portion, the price will be comparable to US dollar prices. Keeping this in view Taka quotes should be allowed a higher pricing in the procurement process.

Bangladesh needs power, which is the most basic Infrastructure. Only 18 per cent of Bangladesh's population has access to electricity. It is a shame that we have 26 TCF to 60 TCF gas and yet our people do not have access to electricity.

Another most Important infrastructure is a pool of indigenous private sector companies. The development of these two Infrastructures should be in tandem. Unfortunately the local business houses are deprived of and not provided with equal opportunity as their foreign counterparts. Here are a few examples:

• In all procurement processes especially with the advice of multilateral agencies. Bangladesh requires experience of about 200 per cent of the project for which bids are sought. We all know In Bangladesh energy sector was a government monopoly, naturally there Is no experience of owning a power plant or gas related business. This qualification criteria effectively bars Bangladeshis to take part In their own country's development

• A similar lack of experience was also there when banks were allowed in the private sector. It was addressed by giving licence to those banks who had qualified bankers, as was the case also in the Insurance in- •

dustry. In fact Bangladesh has a huge pool of personnel in energy sector from BPDB. Petrobangla and people working abrqad.. Therefore local companies should be allowed to participate in these tenders provided they have experienced personnel rather than experience in owning, otherwise there will be no indigenous firm ever owning an energy company.

• As mentioned earlier, foreign companies can access fund at US $ interest rates which is about 7 per cent lower than Bangladesh, therefore local companies' debt cost is 7 per cent more. As such local companies cannot be competitive. However local companies can sell electricity in Taka against US $ by multinationals and dollar appreciates by about 7 per cent. So a preference of

about 7 per cent should be given to local companies otherwise the competition is unfair.

Still another concern is tax. while the local companies have to pay a hefty 40 per cent corporate tax. multinationals usually are domicile in so called tax havens and do not have to pay tax.

Further,, today all the maps, statistics and information available with the government are provided by the multinationals who are direct beneficiaries of government decisions.

If local companies are not allowed to develop in these very important sectors how will the country finally benefit?

The writer is chairman of Summit Group. United Summit Power Co. Ltd and Khulna Power Company Ltd. The writeup is based on his paper presented at the international conference on "Gas and Development: Learning from Experience held in Dhaka on 28-29 June.