Finance Minister A.M.A. Muhith has hinted at further hike in power and fuel oil prices in the coming days. Unabated price hike of oil and food in the international market created some unexpected risks for the economy, stated the minister.
Mentioning the energy price-hike, the finance minister informed the parliament that the government would adjust price of power and energy to reduce pressure on subsidy and to rationalise government expenditure. The Finance minister announced that the government had already adjusted the price and it would continue to do this in the future in line with the import prices of fuel oil.
As a follow-up the government has decided to cut the generation of electricity from the existing liquid fuel-based power plants to reduce the pressure on the country’s balance of payments. The decision is taken when increasing load shedding due to supply shortages of power started to hit the media headlines. Bangladesh Power Development Board (BPDB) has stopped generating power from 10 oil fired power plants. Production of electricity has been halted at the 50MW power plant at Keraniganj, 96MW power plant at Siddhirganj, 54MW power plant at Gazipur, 100MW power plant at Julda, 110MW power plant and 60MW power plants in Khulna, 5MW power plant in Barisal, 50MW power plant in Katakhali, 20MW power plant in Rangpur, 20MW power plant in Sayedpur and 47MW power plant at Thakurgaon. The generation costs for these Bangladesh Power Development Board (BPDB) oil-based power plants vary within Tk15-17 per unit while the average BPDB sale price of electricity per unit is Tk5.35. BPDB needs Tk400 million per day to purchase diesel and furnace oil for generating power from 33 oil-based power plants. As a result of halting power generation from the above 10 oil-based power plants BPDB expects that the costs for liquid fuel will come down to Tk200 million per day. This move will also reduce power generation from oil based power plants and the BPDB sources suggest that the electricity generation from BPDB power plants would be 462 MW during off pick hours. (BPDB has a total 2200 MW power generation capacity (installed) and the current BPDB generation from 33 power plants stand at 1427MW).
Unfortunately we have no good news from the international arena especially on economic recession or for improved energy and power supply sources. Rather, the conflicts and political unrest in the oil-rich Middle Eastern countries create more uncertainties for the world economy. The recent development in the Israel-Iran tensions may not be limited within the Middle Eastern conflict zone.
To avoid the short-term risk of challenging initiatives for local energy resource development projects government opted to continue for petroleum import-oriented energy and power development projects. Clearly the initiatives were not well balanced in view of the fact that it missed the calculated risks of growing pressure on subsidy for energy and utility services and for increasing hard cash payment requirements for petroleum Imports. Now, policymakers are stating that the government would fail to bag the credit for initiating long-term major projects for energy sector development including extraction of coal from the deposits in the northern Dinajpur and Rangpur districts and for base-load coal-fired power plants development. But the over simplification of energy and power sector development based on import options and showing super sensitivity to the populist pressure groups exposed the country to more crisis. There has been no attempt thus far to assess the benefit of cost analysis for development of local coal resources. At the same time government officials have been continuing to issue contradictory statements for its reliance on coal fired power development for the future.
The government’s plan for power sector development presently envisage for 38,700 MW power generation within 2030; of which 8,400 MW to be generated from import coal and 11,250 MW from domestic coal. It implies that local mines to ensure supply minimum 33 million tonne of coal annually for power generation and additional 25 million tonne of coal to be imported in a year. Without massive investment for deep sea port facilities and improved inland water ways development and capacity development for imports of coal, it will be impossible to attain even part of the dream. Also, government needs to expedite coal exploration, feasibility studies for potential coal field development immediately followed by arranging investors for mine development for producing coal. Experience shows that government expects investment for coal sector development but there are no bankable study reports for coal mining potentials. Some people want underground coal mining option to be the only option for our country not fully understanding what underground coal mining involves in the conditions of our coal fields.
If we continue to listen to unprofessional advice for underground mine development for local coal resource development, we will require to build 33 Barapukuria-size underground coal mines which are uneconomic, excessively costly and unable to run safe. Unfortunately we have so far only five discovered coal fields and they are in the adjacent localities, hence there is no room for development of such a huge number of underground coal mines in the country. If people choose to ignore economic, safety and environmental realities for coal extraction technology; annual production of 33 million tonnes of coal with only underground mining facilities in Bangladesh will be technically impossible. Moreover, the policymakers cannot ignore the issues of investment for coal development. It is obvious that no investor will finance an uneconomic mining project.
It is now clear that growing pressures on the country’s balance of payments significantly tied with the energy imports and huge subsidy for energy in the domestic market. The finance minister talks about taking unpopular decisions for ensuring microeconomic stability. Should not the apparent unpopular but necessary decision for development of domestic coal resources capable of producing required quality and volume for power generation be an urgent task now?
Dr Mushfiqur Rahman is a Mining Engineer.