Power producers urge govt to clear dues to keep plants running, avert load-shedding

The Bangladesh Independent Power Producers' Association (Bippa) has urged the government to clear outstanding power bills owed to private power plants, warning that delays could disrupt fuel imports and lead to load-shedding during the upcoming summer.

The association said power producers are struggling to open letters of credit (LCs) to import fuel due to delayed payments at a time when global energy markets remain volatile amid the ongoing Middle East conflict.

The appeal was made at a press conference held in the capital yesterday by Bippa, which represents privately owned power plants in the country. Former Bippa president Imran Karim presented an overview of the current power sector situation at the event.

Bippa said outstanding payments owed to private power producers have reached around Tk14,000 crore, making it increasingly difficult for companies to maintain operations.

Under existing power purchase agreements, electricity bills are supposed to be settled within 30 days, but payments are currently being delayed by 180 to 270 days, according to the association.

Such prolonged delays have created severe financial pressure for power plant operators, making it difficult to procure fuel and sustain electricity generation.

"If the payments are cleared, fuel can still be imported even under difficult global conditions, including the ongoing war situation," Imran said.

To address the issue, Bippa suggested that the government could adopt a similar approach to the one taken by the previous interim administration.

Imran noted that the interim government had earlier issued Tk5,000 crore in bonds to partially clear outstanding payments to power producers.

The move, along with regular bill payments afterward, helped stabilise the sector and ensured uninterrupted electricity supply during last summer, he said.

"As a result, there was no major load-shedding during last year's summer," Imran said, adding that the current government could also issue bonds or allocate funds to settle the dues and avoid a similar crisis this year.

Effective power capacity lower than installed capacity

Although Bangladesh's installed electricity generation capacity exceeds 28,000 megawatts (MW), a large portion of that capacity remains idle due to fuel shortages and other operational constraints, power plant owners noted.

According to Bippa, more than 6,000MW of generation capacity remains unused because of insufficient gas supply, while another 1,626MW is currently offline for maintenance.

In addition, solar power is unavailable at night, and many diesel-fired plants remain shut due to high operating costs.

As a result, the country's effective available capacity during peak demand stands at around 18,627MW, and actual generation could reach about 18,000MW if fuel supplies remain stable, Imran said.

Fuel costs rising faster than electricity tariffs

Imran also pointed out that global fuel price increases have significantly raised electricity generation costs.

According to his analysis, fuel costs for power generation have risen by about 95% over the past six years, while electricity tariffs have not increased at the same pace.

During the same period, operational costs of power plants have increased by 55%, adding further financial pressure on plant operators.

Meanwhile, about 70% of electricity consumption in Bangladesh occurs in residential, commercial, and agricultural sectors, where tariffs have increased by only 54% over the same period.

As a result, higher electricity generation would increase the government's subsidy burden, as production costs continue to rise faster than retail tariffs.

To ease pressure on electricity generation costs, Bippa called on the government to temporarily withdraw import duties on fuel used for power generation.

Specifically, the association proposed removing 34% duty on imported fuel oil and 22% duty on imported liquefied natural gas (LNG).

According to Bippa, such measures could help lower generation costs at a time when global energy prices remain volatile.

Gas shortages limiting power generation

Bippa President David Hasanat also noted that managing electricity demand during the upcoming summer could be challenging due to multiple constraints.

"The situation could become even more complicated due to the ongoing Iran war, which is affecting global fuel markets," he said.

Hasanat added that around 23% of the country's power plants are currently unable to operate due to gas shortages, further straining the electricity system. He noted that increasing gas supply in the short term remains difficult because of infrastructure limitations.

"There is no immediate scope to significantly increase gas supply, and the infrastructure needed to expand imports is also limited," he said.

Fuel reserves may last until early April

According to Imran, oil-based power plants currently have enough fuel reserves to operate until 7-10 April, although the situation may vary across facilities depending on individual fuel stocks.

"To keep these plants operational, it is essential to ensure a steady fuel supply and timely payment of bills," he said.

Responding to questions about reducing generation costs, Imran said operators of furnace-oil-based power plants have already made concessions.

He noted that the interim government had reduced the service charge on fuel imports from 9% to 5%, which plant owners accepted.

He also said power producers are not charging interest on overdue payments, despite bills remaining unpaid for up to nine months.

"In contrast, some suppliers in other sectors shut down operations due to unpaid bills, but private power plants have continued operating despite the outstanding dues," he said.

Despite the challenges, Hasanat said private power producers remain committed to supporting the government in maintaining the electricity supply.

"We are ready to support the government in maintaining a stable electricity supply. After all, if the country survives, we all will survive," he said.