Timely Project completion is the key

Finance Minister AMA Muhith proposed a Tk. 340,605 crore budget for FY2016-17 in the National Parliament on June 2, 2016. The significance of power and energy sector has been reiterated in the budget speech. Efforts to further the progress of this sector is evident from the national budget. However, whether the actual progress is keeping pace with the government's plan is a matter of concern. The following analysis is based on the immediate reaction on the proposed National Budget for FY 2016-17 by the Centre for Policy Dialogue (CPD).

A total of Tk. 15,035 crore was allocated for the power and energy sector in the budget for FY2016-17. This allocation is 9.5 percent lower than that of revised budget for FY2015-16. The key driving force behind this reduction is lower allocation for development projects, particularly in the power sector. Compared to FY2015-16, development allocation for power sector saw a 19 percent decline in FY2016-17. Consequently, the share of power and energy in total budget outlay reduced to 4.4 percent in FY2016-17 from 6.3 percent in FY2015-16. However, the allocation is still heavily concentrated to the power sub-sector – about 87 percent of total allocation of the sector will go to the power sub-sector, while only about 13 percent will go to the energy sub-sector. Given the growing demand for gas for industrial activities, more and targeted allocation is needed for the development of the energy sub-sector.

The power and energy sector constitutes about 13.5 percent of the total Annual Development Programme (ADP) for FY2016-17. Sixty nine projects are associated with power sub-sector while fourteen projects are related to energy sub-sector. Out of the sixty nine power sector projects, only five are new (Ghorashal 4th unit repowering project; Land acquisition, rehabilitation, EIA, and feasibility study for the 2*600MW ultra super critical coal power plant in Pekua, Cox's-Bazar; Aminbazar–Maowa–Mongla 400KV transmission line; Replacement of 70,000 overloaded transformers under REB; Establishment of supervisor control and data acquisition system in DESCO areas). The newly approved projects involvepower generation, transmission and distribution (T&D) and data acquisition. Among the unapproved and unallocated projects, seven are related to power production, five are concerned with T&D, and two involve rural electrification. Given the growing demand for better transmission and distribution, relevant projects need to be completed quickly.

Twenty four out of the sixty nine power sector projects are listed to be finished by FY2016-17. However, even with full utilisation of allocated resources up to FY2016-17, only two are likely to be completed. Those projects are: Land acquisition, land development and protection for Paira 1320MW thermal power plant and Sustainable energy for development project.Maximum possible completion for the remaining twenty two projects lies in the range from 11.4 per cent to 88.6 per cent. Timely completion of nineprojects (out of the aforementioned twenty four) concerned with power generation would have added 1745MW of electricity to the national grid. Nevertheless, maximum possible completion of these projects up to FY2016-17 range between 12 per cent and 62 per cent.

Three projects (Matarbari 2*600MW coal power plant, Bheramara 360MW combined cycle power plant and Ashuganj (east) 400MW combined cycle power plant) were identified to be critically important for the supply of electricity over the medium term. However, implementation has been poor till now. Maximum possible completion up to FY2016-17 of these three projects is 8 percent, 66 percent and 7 percent, respectively. This sluggish rate of overall project completion would some way undermine the claim made in the budget speech of raising electricity generation by additional 16,086 MW by 2021.

In the budget speech, the finance minister emphasised the improvement of transmission and distribution systems along with reduction of electricity pilferage and system loss. It was mentioned that only 70 percent of electricity that Bangladesh is capable of generating can be supplied to consumers. But the completion status of T&D projects does not present a very optimistic picture. Eight related projects out of the aforesaid twenty four are likely to have a maximum possible completion of 11.4 percent to 70.7 percent within the deadline. Hence, it must be mentioned that transmission and distribution of power is becoming a growing concern day by day.

In the ADP for FY2016-17, fourteen projects are related to oil, gas and mineral resources. Out of these projects, twelve are concerned with gas production and distribution; one is related to oil. However, five are carry-over projects. The Hatikumrul-Bheramara gas transmission pipeline construction, and evaluation, development and controlling gas ejection of the Titas gas field are the only two projects scheduled to be completed within FY2016-17.

The government has decided to import liquefied natural gas (LNG) with the aim of meeting the increasing demand for fuel in the country. Early steps have been taken to construct a Floating Storage and Re-gasification Unit (FSRU) - based LNG terminal at Maheshkhali in Cox's Bazar to store the imported LNG. However, Maheshkhali-Anoara gas pipeline project- an integral part of LNG terminal project and scheduled to be finished in FY2015-16 - could not spend a single taka up to March 2016.

As mentioned in the budget speech, the government has taken steps to augment gas reserves by expediting the exploration programme. BAPEX plans to dig 53 exploration wells, 35 development wells and 20 workover wells by 2021. It is expected that 943 to 1,105 million cubic feet gas per day can be produced from these wells. Despite the government's commitment to expedite such exploration programmes, only one relevant project (Exploration for mineral resources in the north-west region of Bangladesh) is found in ADP, but it is still in 'unapproved and unallocated' status.

During April 2016, the government had announced the reduction of the administered prices for fuel in three phases.The prices of diesel and kerosene were reduced by 4.4 percent (from Tk. 68/litre to Tk. 65/litre), whereas the prices of octane and petrol were reduced by around 10 percent in the first phase. The main users of kerosene and diesel – the marginal people and farmers – could not reap much benefit from this decision due to its scale and timing. Unfortunately, no clear specification of the phases or scale of future fuel price reduction was provided in the budget for FY2016-17 which might have been very beneficial for the people of Bangladesh.

Overall, the budget for FY2016-17 gives us glimmers of hope regarding the power and energy sector, alongside a number of concerns. Time and cost effective implementation of relevant projects is necessaryfor further advancement of this sector.

Khondaker Golam Moazzem is Additional Research Director and Muntaseer Kamal is Research Associate at the Centre for Policy Dialogue (CPD). Emails: moazzemcpd@gmail.com , muntaseer.kamal@econdu.ac.bd.