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Experts discourage costly rental power

Suggest fast-track coal policy

Staff Correspondent
Top economists yesterday urged the government to fast track the coal policy, instead of relying too much on costly rental power, to ensure energy security.
Some of them backed open-pit mining as an option. They said there was no point going for underground mining as the method produces only up to 20 percent of a
proven coal reserve as against 90 percent under open-pit operation.
Bangladesh is failing to reach a decision about the mining method due to resistance from a small group of people, said Mohammed Farashuddin at a dialogue, "Challenges facing the economy and the tasks ahead”, organised by The Daily Star at its office in the capital.
A former governor of the central bank, Farashuddin called for political consensus on the mining method. “One government will not be able to do it alone. Here we need political consensus. Then we will be able to do it.”
He said the government should draw up an “excellent programme" to settle people to be affected by the open-pit mining.
The government has to go for coal-based power plant for ensuring energy security of the country, Farashuddin said.
To back up his argument, he said South Africa produces 94 percent of its electricity from coal, China 81 percent, Australia 76 percent, the USA 49 percent and India 64 percent. “We have good quality of coal, but we cannot extract."
The government was due to import two compressors for improving pressure of the gas, Farashuddin said, but nothing has been done about the issue in the last two years.
He noted Infrastructure Development Company Ltd and Bangladesh Bank are doing a fantastic job in taking steps to spread usage of solar panels in the non-grid areas.
“By lighting 1 million households they have actually lighted the economy. We should try hard so that solar energy covers 10 percent of the population in place of the current 3 percent," he said.
The speakers at the programme suggested that the government review its plan on furnace oil-based quick rental power plants as these were affecting the country's balance of payments due to costly fuel imports.
They said the costly power could be made cheaper by increasing generation and utilising it in the manufacturing sector.
Since assuming office in January 2009, the government has approved about two dozen fuel based rental power plants to produce electricity on an emergency basis to reduce load shedding.
Initially, the project tenure was for three to five years, but for some projects the lifeline is about 15 years, which the economists say is not well-judged.
"By allowing quick rental power plant the government has prolonged the burden," said Mirza AB Azizul Islam, finance adviser to the last caretaker government.
To feed these rental power plants, the country's fuel imports have doubled this year to 70 lakh tonnes from about 35 lakh of two years back. Coupled with rising import of capital machinery, this is putting pressure on the
balance of payment.
"The high dependency on quick rental power has put us in a quicksand,” said Zaid Bakht, research director of Bangladesh Institute of Development Studies (BIDS).
"Due to these plants we are being forced to double our oil imports. As a result, it has created problems on domestic fronts. I do not see any short-term respite from this. But we have to come out of it.”
Mustafa K Mujeri, director general of BIDS, noted that rental power plants were a stop-gap measure. "Although they were not appropriate for us, we did not have any other option to save the country from the power crisis.”
When the country had to rely on imported oil to resolve its energy crisis, it has failed to tap its own coal resources by formulating a coal policy.
"The government should know that the oil import bill will go up due to the rental power plants. But we did not do much home-work on the issue. It is a failure on the part of the government,” Mujeri said.
"The delay in taking decision costs dearly. Our development is being hampered. This is an example how we are wasting our time.”
Sadiq Ahmed, vice-chairman of Policy Research Institute of Bangladesh (PRI), added, "The shortage of primary fuel is a major concern. We have to diversify our energy resources. We have to finalise our coal policy."
"We also need to engage in energy trade with neighbours and take steps to bring hydropower from Bhutan,” he pointed out. “We also need to lower our dependency on quick rental power plants.”
Mustafizur Rahman, executive director of Centre for Policy Dialogue (CPD), said Bangladesh would have to produce 40,000 megawatts of electricity in 2025 for 8 percent GDP growth. “But the government plan is to produce electricity up to 2015 by imported coal.”
"We have coal, but we are not being able to take a major decision like this despite urgency,” he said.
Zahid Hassan, senior economist of World Bank, said Bangladesh had no other way but to go for expensive electricity. “But expensive electricity can be cheaper if the government can increase supply and use power in the manufacturing sector."
"Bangladesh has to solve its problem for primary energy. The government cannot take it for granted the situation, when power used to go off in every two hours a few years ago, will not come back.”
The speakers also thanked the government for paying attention to strengthen state-run Bangladesh Petroleum Exploration and Production Company Ltd.
Mahfuz Anam, editor and publisher of The Daily Star, also spoke at the discussion.