The “PRIVATE SECTOR POWER GENERATION POLICY OF BANGLADESH” was approved by the Government with a view to boosting up private sector power generation in the country. The government of Bangladesh (GOB) recognizes that the pace of power development has to be accelerated in order to achieve overall economic development targets of the country and avoid looming power shortages. At present only 15% of Bangladesh population has access to electricity.
1. Presently, there state-owned enterprises generate and transmit electricity in the country. They are:
a) Bangladesh Power Development Board (BPDB), responsible for generation and transmission of power in the urban areas except the area under Greater Dhaka;
b) Dhaka Electricity Supply Authority (DESA), responsible for distribution of electricity in the greater Dhaka area including the metropolitan city of Dhaka; and
c) Rural Electrification Board (REB), responsible for distribution of electricity in rural areas.
* At present 11666 GWh electricity is generated annually in the country. Power System Master Plan (PSMP) projects a requirement of 16500 GWh in 2000 and 24160 GWh in 2005. This implies an increase in peak demand from the present 2200 MW to 3150 MW by 2000 and 4600 MW by 2005 for which capacity addition of about 3350 MW will be required by 2005. Hence on average, additional 300 MW of generation capacity has to be added every year. The total investment between now and 2005, required to achieve such capacity enhancement, is Taka 176 billion or US$ 4.4 billion. The corresponding investment requirement for expansion and reinforcement of transmission and distribution system would be about US$ 2.2 billion for the same period, bringing the grand total to US$ 6.6 billion.
* Such a huge investment on the part of the GOB is almost impossible, Govt., therefore, has amended its Industrial Policy following the recommendation of the Inter-Ministerial-Working Group for Power Sector Reform. As per the revised policy the Government is strongly committed to attract private investment for installing new power generation capacity on a Build-own-operate (BOO) basis.
2. GOB POLICY AND THE POWER CELL:
In order to translate this explicit policy of the Government into actual investment projects, Government of Bangladesh created and set up a Power Cell under the Ministry of Energy and Mineral Resources (MEMR) in 1995. All the responsibilities of private sector power development lie with the Cell. The Cell will solicit and evaluate proposals, negotiate and process award of contracts and finalize projects. At the same time it will represent interest of Government of Bangladesh in the private sector power project.
SOLICITATION OF PROPOSALS: Independent Power Producers’ Projects will be implemented on Build-own-operate (BOO) basis. Before submission of the REP (request for proposal) the bidders will have to pre qualify as per criteria published in the National and International Press. Proposals of the pre qualified bidders will be ranked as per criteria and acceptance will be given accordingly. The first ranked bidder will be given a stipulated period to (a) submit a performance guarantee and (b) reach financial closure. After that the bidders will be required to complete financing arrangements. The bidder will also have to ensure security package through three separate agreements: (a) Model Implementation Agreement (IA), (b) Power Purchase Agreement (PPA) and (c) Fuel Supply Agreement (FSA).
3. ALLOCATION OF PROJECT/PLANT SITE AND PROVISION OF FUEL: The plant site will be selected by Government of Bangladesh in consultation with the project sponsor. The fuel supply will also be determined by GOB keeping in view the existing fuel situation of the country.
4. TARIFF FOR BULK PURCHASE OF POWER AT BUSBAR:
-The produced power will be purchased (As per PPA) by BPDB/DESA/REB or any distribution company to be created in future and it will be decided by Government of Bangladesh. Tariff will be divided into two parts:
(a) Capacity payment - in local currency in case of local payment and in foreign currency in case of foreign payment.
(b) Energy payment- all in local currency. They will have to meet other tariff requirements as per RFP.
5. FISCAL INCENTIVES: The private power companies will be given some fiscal incentives such as exemption from corporate Income Tax for a period of 15 years. Customs and VAT free import of plant and equipment, repatriation of equity and dividend, exemption of Income Tax of foreign Investors in Bangladesh, Insurance facilities according to their own choice, instruments and deeds exempted from stamp duties, all industrial facilities as Power Generation declared as Industry, raising local and foreign finance as per BOI Investment Rules and indigenous equipment support.
6. In case of any ambiguity with regard to interpretation of any provision of this policy documents the GOB interpretation shall be final.
For details, users are advised to refer to “Private Sector Power Generation Policy of Bangladesh” published by the Ministry of Energy and Mineral Resources, GOB.
Source: Bangladesh Bureau of Statistics