Power Crisis in Bangladesh and Privatization in the Sector
of Power Generation as a Consequence
Md. Rajibul Islam
Department of Electrical & Electronic
Engineering
Bangladesh University of Engineering &
Technology
Dhaka-1000, Bangladesh.
Email: rajib106@yahoo.com
Third Author
Dipen Sarkar
Department of Electrical & Electronic
Engineering
Bangladesh University of Engineering &
Technology
Dhaka-1000, Bangladesh.
Email: dipen_sarkar@yahoo.com
ABSTRACT
According to the power sector growth in Bangladesh, the
country needs 450 MW power each year to meet the
growing demands. Previously, all the power plants of
this third world country were in public sector. But all
must bear in mind that the building of this particular
infrastructure require large amount of capital and is
encountering increasing difficulties to finance the
required capacity either through the government budget
or even by the international development agencies and
financing organizations. But the Government of
Bangladesh (GOB) is unable to provide the finance to
install new power plants according to the growing
demand. That’s why in the year 1996 Government of
Bangladesh decided to build power plants in private
sector. Instead of taking this step now the country is
facing severe power crisis. This paper discusses the
problems to privatize power generation sector and
prospects of private sector power plants. Necessary
recommendations will also be given in this paper for the
benefit of the power sector of the country.
1. INTRODUCTION
Electricity, in the modern century, is the most important
infrastructure which contributes the most for the
economic development of a nation. For a developing
country like Bangladesh whose per capita electricity
consumption (130Kwh/160Kwh per annum) being
among the lowest in the neighboring least developed
nations amply reflect the economic index of the country.
Electricity has contributed largely in generating
resources, employment and income. Electricity
contributed this process by generating additional
employment in agriculture, generating income from new
industry, expansion of business and developing the
Second Author
Zobayer Abdullah Khizir
Department of Electrical & Electronic
Engineering
Bangladesh University of Engineering &
Technology
Dhaka-1000, Bangladesh.
Email: kzr122@yahoo.com
service sector. Thus, in the sector of agriculture,
industry, health and education electrification is severely
needed.
Electrification brings indirect benefits to the unemployed
people. When industrial and commercial units flourish, it
becomes the centre of attraction for the people of
neighboring non-electrified places. There are numerous
examples of residents of non-electrified villages having
shops in electrified markets in a third world country like
Bangladesh. Electrification gives people more scope to
work and earn in both urban and rural areas.
For the economic emancipation and in order to meet the
Millennium Development Goals necessary steps should
be taken to meet the electricity demand. That’s why
government decided to build power plants in private
sector by the Independent Power Producers (IPP). Also
the government published a policy named “Private
Sector Power Generation Policy of Bangladesh”. And
everyday 25%-30% of total electricity is being produced
by these Independent Power Producers (IPP).
In summer, 2006 (this year) during pick hour the daily
electricity demand of the country was almost 4500 MW.
On the other hand the average production was in
between 2500 MW -3000MW. The reason is that
government is neither able to provide the finance to
install new power plants nor able to give license to new
Independent Power Producers (IPP). Now the question
can arise that why the government is not able to give
new license to install new power plant in private sector.
2. OBSTACLES IN PRIVATIZATION
The government can’t give frequent license to the
promoters in the private sector due to the following
reasons.
2.1. BAD LOAD MANAGEMENT
According to the agreement, government is bound to buy
electricity continuously from the private power
producers. Maximum companies are not stipulated by no
electricity no payment system. So, if there is no need of
electricity the government is bound to buy electricity
from the independent power producers. And the rate of
cost of power also increases when the power factor
decreases. That’s why the government faces a huge loss
during the off-peak hours.
4500
4000
Demand in MW
3500
3000
2500
2000
1500
1000
500
0
1 3 5 7 9 11 13
Hour
Figure 1: A typical daily load curve
From a typical daily load curve given below we can see
that very pronounced lightening peak occur in the
evening and maximum load shading in the country occur
at that time. Minimum load is about 40% to 55% of peak
demand depending upon seasonal variation. During the
Jumma prayer (Muslim’s weekly prayer) on Friday
(weekend) the demand declines more. So, the demand
can be met by the installed capacity during off-peak
hour. But the government is bound to buy electricity
from the private power producers during off-peak hours
also.
From the entrepreneur’s view it is not possible to shut
down the plant during off-peak hours. Small power
plants can be shut on and off according to the demand
curve, but the large power plants cannot handle this
variation in demand, resulting in huge inefficiency.
According to the Bangladesh Power Development Board
(BPDB) sources, only 35 MW of electricity from the 110
MW capacities of KPCL (an independent power
producer) was utilised at 7:00 o’clock in the morning
(off-peak time) on a particular day (16th April, 2006).
We know, Load factor= Lavg / Lmax ; where Lavg= average
load for a period and Lmax= peak load for that period. For
economic reasons, it is desirable to have high load
factor, as this would permit better utilization of plant
capacity.
So, if the differences of power demand between peak
hour and off-peak hour can be reduced, the government
will not have to face the loss as described above.
2.2. PROBABILITY OF LOSS DUE TO LIMITATION IN
AGREEMENT
Another problem according to the agreement between
the government and the private power producers is that if
the investors keep the plant closed during war time or
during any socio-political instability government is
bound to pay them because they will have to recover the
investment cost and make profit within fifteen years.
Now, if they keep the power plant closed at any normal
time with a lame excuse nothing can be done by the
government and government is bound to pay them.
2.3. FOREIGN CURRENCY RESERVE LIMITATION
Most of the investors in the power sector are foreign
investor. As in the developing countries like us as the
supply of foreign currency is not sufficient, always
money devaluates and as the demand of local currency is
not enough the foreign investors are disagreed to take
payment in local currency.
That’s why the government has to pay them from the
earning reserve of the country which is a great burden on
the economy of a third world country.
15 17 19 21 23 Besides, when local currency devaluates the government
has to pay extra loss.
3. PROSPECT OF INDEPENDENT POWER
PRODUCERS
Because of the demand of electricity in the country and
the inability of the government to install new power
plants according to the demand, the Independent power
producers have a good prospect in Bangladesh.
Besides, they have created some employment
opportunities which are also helpful for economic
development.
According to the Hirschman’s unbalanced growth
theory, investment should be made in selected sectors
rather than simultaneously all sectors of the economy.
So, we have to encourage Independent Power Producers
(IPP) for the development of the country though it
creates pressure on the foreign currency reserve.
Because, the development of the power sector will
encourage the development of the other sectors. But for
these developments the government should take the
correct policy and the socio-political condition of the
country should be improved.
4. RECOMMENDATIONS TO OVERCOME THE
OBSTACLES IN PRIVATIZATION
Necessary recommendations are given below.
4.1. RECOMMENDATIONS TO IMPROVE LOAD
MANAGEMENT CONDITION
Differentiated rate should be maintained for peak and
off-peak consumption.
Optimum use of electricity should be confirmed. Proper
accounting must be ensured of all the units of electricity
in every stage that is production in the power station,
stepping up and transfer to the grid sub-station,
transmitting to different grid sub-stations, stepping down
and transfer to the different substations throughout the
country, transfer to distribution lines and distribution
transformers and finally to the end use consumers. Any
kind of electricity leakage at any stage must be
minimized.
Attempt can be taken to apply two part tariff, by which
consumers of certain categories will be billed at higher
rate for their consumption during peak hours, which will
motivate them to use less electricity at peak hours and
more electricity during off-peak hours.
Advertising signboards which use search lights, neon
bulbs, motors etc. consume huge amount of power must
be prohibited during peak hour.
Illumination for dressing and decorating markets during
peak hour must be prohibited.
Beside the off day of the week, every market in the city
area may be closed after 18:00 o’clock for any three
days of the week.
Captive power generation should be encouraged in large
industries to use it during peak hour. But they will have
to be ensured uninterrupted power supply during off-
peak hours.
Industries, especially the garment industries located in
the city centres can reschedule their operating hours
outside the peak hours. Welding works, operation of arc
furnaces and other heavy load consuming plants may
remain closed during peak hours and may be opened
during off-peak hours.
Consciousness of cultivators should be increased to close
irrigation pumps during peak hours.
Domestic consumers can grow their habit of not using
unnecessary lightings, water pumps, iron and air
conditions etc. during the peak hour.
Small power plants should be encouraged which can be
turned on and shut down instantly at any time.
4.2. RECOMMENDATIONS TO SOLVE FOREIGN
CURRENCY PROBLEM
Local promoters should be encouraged to establish small
power plant in different suitable area of the country and
they should be given opportunities and facilities for this.
Thus, the profit will not go to abroad as foreign
currency.
The politicians should be aware about the socio-political
reliability of the country to the foreigners so that World
Bank (WB) and Asian Development Bank (ADB) issue
loans to our local promoters.
Using the power generated from private sector more
industries should be established and infrastructures
should be developed so that the country can earn more
foreign currency by exporting the goods to foreign
countries.
Necessary policies should be approved to create the
confidence in local currency.
5. CONCLUSIONS
Finally, the power crisis is increasing in Bangladesh with
the growing demand. But new power plants are not
being installed to meet the growing demand. For the
benefit of the country the government should take
necessary steps to install new power plants. Otherwise,
the development process of the country will be
obstructed.
6. ACKNOWLEDGEMENTS
The authors are grateful to Engineer Delwar Hossain,
Engineer Mostafa Kamal and Engineer Fazlul Hoque of
Bangladesh Power Development Board (BPDB) for
providing information and former Asian Development
Bank (ADB) employee Anirban Bhoumik for helpful
discussion.
REFERENCES
[1] Vopat and Skrotzki, “Power Station
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Hill Edition1972, McGraw-Hill book company,
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[2] Abul Barkat, “Impact study on rural
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alleviation,” Presented to Bangladesh Rural
Electrification Board, 2003.
[3] BPDB, “Annual Report 2004-2005,”
Bangladesh Power Development Board, 2005.
[4] BBS, “Private Sector Power Generation Policy
of Bangladesh,” Bangladesh Bureau of
statistics, Dhaka, 1996.
[5] M L Jhingan, “The Economics of Development
& Planning,” 33rd Edition, Konarch publishers
pvt. Limited, Chapter 22, pp187-197, 2003.
[6] Mohammad Alam, “Trade And Financial
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