PDB bleeding due to capacity charge trap in Bangladesh

The country’s power sector is currently going through a terrible paradox. On one hand, ordinary people and industries are crying out for uninterrupted power, on the other hand, the Power Development Board (PDB) is facing huge bills to pay to idle power plants.

Three major gas-based private power plants (IPPs) approved for political reasons are- Summit Meghnaghat-2, Unique and Jera have collected Tk 3,374 crore just from ‘capacity charges’ without generating any electricity in the past one and a half years.

The greatly varying capacity charges paid to power companies with similar capacities highlight a chronic ill practice by the fallen Awami League regime, sending Bangladesh’s economy into a tailspin. The PDB calculated the capacity charges considering the use of 60 percent capacities of the power plants.

The investigation found that during the previous government’s tenure, these centers were approved under a special law without tenders and without proper technical evaluation. The answer is clear – the main goal of the previous administration was not to ensure the country’s energy security, but to appease special business groups and beneficiaries. As a result, the debt burden on the PDB has now become unbearable.

According to the agreement, even if the Jera power plant does not produce any electricity, it will still generate Tk 105 crore per month and Summit and Unique receive a capacity charge of Tk 86 crore each per month. Energy experts say, the government-owned EGCB plants are being shut down due to the gas shortage. These influential private centers are being billed. This is a direct form of robbery of the state treasury.

Another alarming fact is that if these plants were to run on diesel as an alternative to gas, the cost per unit would be around 40 taka, which is five times more than producing with gas. That is, no matter how it is run, the burden will ultimately fall on the general consumers and government subsidies.

The interim government will have to take strong and bold steps to get rid of this chaos in the power sector and the thorn in its side called ‘capacity charge’. Simply asking for an additional allocation of Tk 4,000 crore will not solve the problem, rather, the need of the hour is to uproot the roots of corruption and formulate a transparent and affordable power generation policy. Otherwise, this hemorrhage in the power sector will cripple the entire economy.