Power producers demand payment of half of dues within 10 days to avert Ramadan blackout

Local independent power producers (IPPs) have urged the government to clear at least half of their outstanding dues, approximately Tk9,000 crore, within 10 days to prevent power shortages during the upcoming Ramadan in March and the subsequent rice-growing season, which requires heavy irrigation.

During a meeting with Power Division Secretary Farzana Mamtaz at the Secretariat yesterday (7 January), IPPs warned that failure to settle dues promptly would hinder their ability to import fuel oil necessary for running power plants.

They said up to 2,500MW of heavy fuel oil (HFO)-based power generation capacity could remain idle during Ramadan if fuel imports are delayed. This would result in significant load shedding at a time when demand will grow significantly.

Highlighting the gravity of the situation, Bangladesh Independent Power Producers' Association (Bippa) President KM David Hasanat, said, "Approximately Tk18,000 crore in bills remain unpaid [in the power sector], with payment delays now exceeding six months, compared to the 45-day limit stipulated in contracts.

"Around Tk9,000 crore of the dues are owed to local companies. If at least half of this amount, Tk4,500 crore, is cleared by mid-January, it would enable timely imports of HFO."

The imported fuel takes about one and a half months to arrive, he added.

According to Bippa, local power producers are facing additional financial strain, having incurred Tk8,500 crore in exchange rate losses since the taka began depreciating against the dollar in 2022.

They are forced to settle LCs for fuel imports at market exchange rates while receiving payments from the government at the lower official exchange rate. This disparity between the two rates is reemerging, posing the risk of further exchange rate losses for IPPs. For example, bills will now be paid at Tk120 per dollar, while LC settlements will cost companies around Tk126.

"Foreign companies are paid in foreign currency and local companies are being paid in local currency," said David Hasanat.

"Leaving local companies unable to import fuel, the Bangladesh Power Development Board is also imposing penalties on them in cases of failure to serve. This should end," he told TBS.

About half of the 9,000MW capacity operated by Bippa members depends on HFO-based power plants.

Bangladesh's private power producers have faced severe cash shortages due to prolonged delays in government payments, which have been an ongoing issue since 2022.

While total dues surpassed Tk40,000 crore, the previous government managed to clear Tk15,000 crore by issuing bonds.

To address the mounting dues, the interim government is preparing to issue new bonds worth Tk5,000 crore, according to Power Division officials.