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Private sector import of plant fuel

What is required is for BPC to show precisely to what extent the government will benefit if the new regime is introduced. More importantly, how will the common people benefit from this scheme? Will it help reduce electricity generation cost? If it does, then fine.

Syed Mansur Hashim
THE government plans to allow the private oil-fired power plant owners to import their own oil. According to the plan, it would pave the way for rental power plants to waive the current practice of seeking prior permission from Bangladesh Petroleum Corporation (BPC) for such import. As pointed out in a report in The Independent on May 12, "The government has decided in principle to allow all oil- and furnace-oil based rental and quick rental power plants to import fuel oil. The decision was taken at a meeting yesterday. There are 26 rental and quick rental power plants, and five of them are currently importing fuel oil for their own purposes. Yesterday's decision will allow rest of the power plants to import fuel oil for their own purposes. The power plants will have to pay a nine-percent commission to the Bangladesh Petroleum Corporation (BPC) to import the fuel oil, and by giving this commission, the power plants will be able to use the storage facilities of the BPC. Sources also said that the government will provide required fund to the power plants to import fuel oil. The power plants will not be required to pay any more charges to the government, the sources added."
The argument for the proposal, as put forward by plant operators, is that the fuel supplied by BPC to plants lack consistency and quality that has caused machinery to malfunction during operation. This is an allegation that has been refuted by the state-owned BPC. Whatever may be the case, one cannot overlook the fact that rental power plants now constitute about 20% of the estimated 10,000 megawatts (MW) of installed power generation plants in the country and they are here to stay for the foreseeable future.
There is a counter argument to the concerns raised by BPG and Bangladesh Power Development Board (BPDB). The initiative would allow a regime to come into practice whereby importers would be allowed to import a limited quantity for use in their plants. Hence, we are talking about a nominal volume which will automatically be less attractive than a commercial import. Besides, importers would have to depend on BPC infrastructure for uploading until they develop their own facilities. Furnace oil is not an item that can be sold in the retail market in large volumes. The government for its part will be technically free from the responsibilities of supplying furnace oil at a fixed rate to private sector power plants. In addition, BPC too will be relieved of the additional financial burden it now has to undertake for importing fuel and selling that fuel at hugely subsidised rates to the plants. Monitoring misuse of furnace oil will be an easy one for the government.
There is a whole school of thought in the energy sector which takes a different approach to this issue. Till date only a few plants like KPCL (joint venture between Summit and United Groups) have enjoyed the license for importing liquid fuel. Under the proposed regime, many others will be included. Though arguments have been put forward on precisely how the government may check misuse of the regime, a lot has been left unstated. What is required is for BPC to show precisely to what extent the government will benefit if the new regime is introduced. More importantly, how will the common people benefit from this scheme? Will it help reduce electricity generation cost? If it does, then fine. It is a matter of detail calculation of oil supply value chain.
Given present consumption levels, power plant importers will use all existing facilities to import about 1.6million tons of liquid fuel (furnace oil + diesel). The other argument is that if the government is duped in getting actual charges for letting them utilise these facilities (e.g. ports, inland transport, storage, etc.), then there is no reason to allow them licenses for a critical item as fuel. It is much more desirable for the government to develop the capacity to be able to handle the finances involved in value chain because in the long run, both the government vis-a-vis the citizens of Bangladesh will lose out and the business community would be the final gainer.
The fact is that BPC has been experiencing serious problems with procuring oil for the plants. It has put the company under serious
financial strain. Naturally, the biggest question that comes to mind is precisely what measures the government will be taking to prevent possible pilferage. After all, it is not totally uncommon that when BPC has imported petroleum (including furnace oil) in the past, a portion was smuggled from outer anchorage using barges (there were incidences of such barge load stealing of petroleum reported in the media).
Whatever may be the merits or demerits of the case, the privatisation of import is a natural process. Raising the issue of "unscrupulous importers" is hardly a case in point example, as this class of traders exist in practically every import item to Bangladesh. The initiative being undertaken should help better energy supply and pave the way to affordable energy provided the government takes preventive measures beforehand to disallow a misuse of the import regime.
The writer is Assistant Editor, The Daily Star.