The power and energy sector of the country is passing a challenging period. This is characterised by excessive/overgeneration capacity, over reliance on imported fossil fuels; an inappropriate selection of energy sources (fuel oil and Liquefied Natural Gas – LNG); mounting debt burdens; fiscal pressure created by huge capacity payment, eating up the major portion of subsidy; escalating electricity and energy tariffs; the utilisation of fiscal-budgetary support to favour fossil fuels and a lack of emphasis on exploring alternative and renewable energy sources. Consequently, over the last few years, the sector lacked the capacity to clear payments of imported fossil fuels, faced disruption in power supply due to ongoing energy crisis, has been overburdened with dues of capacity payment to Independent Power Plants (IPPs), rentals and quick rental power plants, and required substantial increased subsidy allocation.It was expected that the proposed budget for FY2023–24 will address these challenges through fiscal-budgetary measures. Unfortunately, little is reflected in the proposed budget to address these challenges. These are some of the findings emerged from the study titled ‘Challenges in the Energy and Power Sector: Can the Proposed National Budget Address those Challenges?’ conducted by the Centre for Policy Dialogue (CPD).
Based on the aforesaid grounds, CPD organised the dialogue titled ‘Addressing Power and Energy related Challenges: Proposed Measures in the National Budget FY2023–24’ on Thursday, 22 June 2023, at the Lakeshore Hotel, in the capital. Dr Khondaker Golam Moazzem, Research Director, CPD, chaired the session alongside delivering the keynote presentation.
Dr Moazzem opined, ‘Addressing the challenges will not be possible only through fiscal-budgetary measures under the national budget. Major structural and policy reforms are needed in the power and energy sector to overcome those challenges’.
‘The government’s focus on imported LNG instead of developing the domestic gas sector is detrimental to the foreign exchange reserves, and their increased reliance on coal contradicts their stance against promoting it, while their negligence towards renewable energy persists with no significant policy or initiative changes’ said the CPD research director.
The analysis of the study predicts load shedding is most likely to continue, affecting households, businesses, and commercial activities as the global energy prices to not go down in the sooner future. The power sector will struggle with unreasonable capacity payment, further soaring subsidies and worsening financial position. This raises concerns about the financial viability of public entities like Bangladesh Petroleum Corporation (BPC), Bangladesh Power Development Board (BPDB), and PetroBangla. Their financial accounts lack transparency, consistently showing negative operative income while providing dividends to the exchequer and receiving government subsidies. This makes it challenging to establish a base price for implementing a market-based pricing model for petroleum.
‘The conditionality imposed by the International Monetary Fund (IMF) regarding subsidy management is being implemented solely through price adjustments, unfairly shifts the burden onto energy consumers’, said Dr Moazzem. He emphasised that the IMF reform agendas are not sufficient to address the challenges and consequences. This subsidy rationalisation needs to be done through gradual withdrawal of capacity payment by phasing out IPPs, rental and quick rental power plants, and making room for renewable and clean energy-based power generation structure, he further added.
He urged the institutional capacity of Sustainable and Renewable Energy Development Authority (SREDA) needs to be thoroughly reviewed, emergency power and energy supply act needs to be repealed immediately, and the current draft of Integrated Energy and Power Master Plan (IEPMP) should be thoroughly revised.
During his presentation, Dr Moazzem pointed out the proposed national budget for FY2023–24 is a ‘business as usual’ budget for the power and energy sector instead of addressing major challenges. So, the expectations are lower that the proposed budget— if it is passed at the parliament in the existing shape—would make improvement in this sector in particular.
He recommended the discriminatory fiscal supports, provided to the fossil fuel-based power and energy, need to be ended gradually to ensure fair play for renewable energy. Supportive fiscal measures need to be promoted to encourage domestic and foreign investment in the renewable energy sector development.
While discussing the impacts of soaring energy prices, the Guest of Honour, Mr Mostofa Azad Chowdhury Babu, Senior Vice-President, Federation of Bangladesh Chambers of Commerce and Industries (FBCCI), said, ‘Due to ongoing dollar crisis, factories are struggling to obtain a sufficient amount of fuel necessary to sustain their production at optimal levels’.
‘In discussions on energy and power sector progress, the amount of electricity produced is often highlighted, yet it is not being addressed that the consumers are not receiving it adequately,’ said Professor Dr Ijaz Hossain, former faculty at Department of Chemical Engineering, Bangladesh University of Engineering and Technology (BUET). He further highlighted that despite of setting the renewable energy target from 2010, the share of renewable energy is one of the 5 lowest countries in Asia.
Commenting on gas exploration, Professor Badrul Imam, Department of Geology, University of Dhaka, said, ‘Bangladesh Petroleum Exploration and Production Company Limited (BAPEX) doesn’t drill enough gas wells despite the capability of to drill a minimum of three gas wells annually.They are unable to do so due to the lack of financial support from the government, on the other hand, more than half of Gas Development Fund (GDF) resources is still unutilised’.
Professor Dr M Shamsul Alam, Dean, Faculty of Engineering, Daffodil International University, opined that consumers are feeling high inflationary pressure due to the high global energy prices but yet mass people are not getting access and availability of electricity due to lack of energy security.
To foster the adoption of renewable energy, depending on only solar energy is not enough. Different renewable energy scopes such as wind, biogas etc need to be explored along with enhancing awareness through roadshows and conduct comprehensive training programs—the recommendation came from Professor Khosru Md Selim, Department of Electrical and Electronic Engineering, Independent University, Bangladesh.
During the open floor discussion, the participants said the power and energy sector requires a guiding principle to improve its coordination and efficiency. Electricity should be made more accessible through increasing its transmission and setting an affordable price. Awareness about different forms of renewable energy should be increased as well.
High-level policymakers, political leaders, academics, development practitioners, civil society activists, and journalists attended the dialogue.