With excess electricity forcing Bangladesh to make capacity payments for idle plants, the government apparently continues to spend more and more on power generation, rather than focusing on transmission and distribution to end users.
Two major power projects gobbled up more than 54% of the revised FY22 Annual Development Program (ADP) budget pie, while another 85 in the power and energy sector remain underfunded, which could lead to a further delay in implementation, according to an analysis by the Planning Division of the sector’s multi-year public investment programme.
The revised total ADP allocation for FY22 was Tk 39,214 crore.
The analysis report indicates that RADP allocations for 85 projects were lower than expected based on the spending profiles for these projects, implying that the projects are relatively underfunded for the 2021-22 fiscal year.
“This increased negative fiscal space is mainly caused by the inclusion of the Rooppur power station project with a total cost of Tk 1,13,000 crore and a total increase in the Matarbari Ultra Super Critical coal-fired power project of Tk 35,984 crore at Tk. 51,855 crore,” he adds.
The report states that the power and energy sector budget cap for ADP 2022-23 and beyond must increase by more than 10% to account for the Rooppur plant and the increase of the costs of the Matarbari electricity project.
Otherwise, it will most likely have a negative impact on the implementation of the project across the sector, according to the report.
To shed some light on an underfunded transmission project, take for example the Barapukuria-Bogura-Kaliakoir 400kV transmission line project which was launched in January 2019 to ensure quality power supply in the northern region of the country.
The project, with physical progress of around 12% as of December last year, saw an 18% reduction in budget allocation in the RADP, which could further delay its implementation.
Project director Sk Zakiruzzaman told The Business Standard: “If we get an allocation in time as needed, we can complete it within the extended 2024 deadline.”
In another example, the replacement of the old AIS 132 kV Ashuganj substation with the new GIS 132 kV substation project saw its cost reduced by 90% in the revised ADP.
The objective of the project is to upgrade the old Ashuganj substation to reduce the risk of national grid outage and ensure reliable power supply to Dhaka as well as Ashuganj and its neighboring areas.
The project, which began in April 2018, has progressed only 25%. The rest of the work must be done by December 2022.
The report suggests that project implementation delays can, to some extent, be avoided when projects nearing completion receive sufficient allocation.
From a financial perspective, 19 projects in the power and energy sector could be completed in FY23 if 6% of the total sector budget is allocated to these projects.
The RADP 2021-22 includes 89 ongoing projects for the power and energy sector, six of which are new projects. Out of 89 projects, 79 belong to the electricity sub-sector and 10 to the energy sub-sector.
Fund deficit will continue in 2022-25
Ongoing projects will not receive sufficient allocation for their implementation in FY22-25.
The budget required for ongoing projects for those years is greater than the project’s budget cap. For FY23, 43,135 crore Tk was projected for the sector against the actual demand of 73,478 crore Tk. Similarly, in FY24, the deficit of the fund stands at Tk 30,514 crore. And, in FY25, there will be a surplus fund of TkTk 23,497 crore, according to the Planning Division analysis.
Nine energy projects with a higher allocation
A total of 9 projects, or 10% of total projects, in the electricity sub-sector received a higher budget allocation for FY22 than the fiscal budget estimate for FY22 suggested in the ARDP 2020-21.
The projects are construction of 400MW Ashuganj Combined Cycle Power Station, Payra Thermal Power Station, Matarbari Coal Power Station, Rooppur Power Station Electricity Evacuation Facilities, Connection of 1.5 million rural consumers, construction of a new substation under DPDC, 5 lakh pre-installation of payment meters and technical assistance for the electricity sector development project.
The Planning Division said this indicates that if all other implementation factors and conditions do not change, these projects will be accelerated from their current implementation trajectory.
Although the analysis indicates an improvement in the implementation of these projects, all these projects are expected to be delayed from the completion date of the PPD (proposed development projects), according to the Planning Division.
There are four projects that will be implemented earlier or as indicated in the PPDs of these projects. These are construction of 100MW Solar Power Plant at Madarganj in Jamalpur, Matarbari Coal Power, Land Acquisition of 700MW Bangladesh Coal Power in Singapore and the Bheramara Combined Cycle Power Plant Project.
Lack of transmission line results in unused capacity
Around 70% of the capacity of the 1320MW Payra Thermal Power Plant, the largest power plant in the country, has been idle since December 2020 due to a lack of the required transmission line.
The construction of the Patuakhali (Payra)-Gopalganj-Mawa-Aminbazar 400kV transmission line was to be ready in line with the power plant.
However, the power plant has entered production, but the transmission line has not yet been completed.
The transmission line – under construction by the Power Grid Company of Bangladesh (PGCB) – is now half finished. The line requires seven turns over the Padma River to connect Dhaka.
Golam Kibria, Managing Director of Power Grid Company, told TBS that the Padma Bridge authorities were responsible for constructing the transmission towers across the Padma River.
“But due to the priority given to the construction of the bridge, the Padma Bridge authorities have delayed the transmission line and recently started constructing the electricity pylons across the river,” he said.
Golam Kibria said, “Work on the towers is ongoing. Two of the seven towers have already been installed. Padma Bridge authorities have assured us that the remaining five will be constructed by the middle of this year.”
But the power cable connection on either side of the river will take another five to six months after the towers are completed, he added.
The power evacuation facilities of the Rooppur nuclear power plant have become another cause of concern for the power division and the power development board of Bangladesh.
The first unit of the power plant is expected to be operational by 2024, but the power evacuation infrastructure installations have made very little progress.
In December last year, the physical progress of the project was only 25%, although the lines should be prepared by December 2023.
The development of the infrastructure for the electrical evacuation facilities of the Rooppur nuclear power plant is implemented through the financing of a line of credit at the cost of Tk 10,981.74 crore.
QM Project Manager Safiqul Islam, however, does not see the under-budget as a problem in implementing the project on time.
He said: “The search for qualified contractors and rising construction material costs appear to be the reasons for a provable delay in project completion.”
Experts said it would be a huge loss to keep the capacity of the 2,400 MW plant idle due to a lack of transmission lines.
Energy expert Professor Dr Mohammad Tamim said: “The Payra power station was supposed to relieve us considerably of expensive liquid fuel. The plant can help us shut down some expensive oil-fired power plants. But we cannot take the opportunity to use the least cost option due to lack of transmission lines,” he said.
Losses from maintaining idle capacity can double if Rooppur and Rampal power stations come on stream without adequate transmission lines, he added.
“If there is now a single most important project, it is none other than the establishment of the power evacuation line from Rampal to Dhaka,” Prof. Dr M Tamim said.
Project delay increases losses
Due to delays in the implementation of power transmission projects, the Bangladesh Power Development Board has suffered losses as it gives capacity fees to power plant owners as a penalty for keeping idle capacity on standby .
In FY 2020-21, BPDB losses increased to Tk 11,287.46 crore from Tk 4,000 crore in FY11.
To keep the losing entity operational, on the other hand, the government provides subsidies in the sector. Government subsidies for the BPDB have also increased significantly.
In FY11, the subsidy in the power sector was Tk 4,511.90 crore, which rose to Tk 11,777.91 crore in FY21.
The installation of a single mooring point causes a crisis of funds in the energy sub-sector
There are 10 ongoing projects in the energy sub-sector. The negative fiscal space in the energy sub-sector is mainly caused by one large project – the single berth installation project.
There is another project “Installation of a wellhead compressor at the site of the Titas gas field” which received a higher allocation than expected based on the expense profiles.
All other projects in the energy sub-sector received a lower budget allocation in the RADP for FY22 than projected based on the expenditure profiles. These lower allocations seem to indicate that a total implementation delay of approximately 0.5 to 3.5 years per project could be expected from the completion date of the PPD, indicates the analysis of the Planning Division.