Power Division, Payra Port at odds over Tk1,225cr 'unpaid fees'

Highlights 

• Port authority says Tk1,225cr unpaid fees from Payra power plant for Rabnabad Channel maintenance
• The power plant says it spent Tk756.8 crore on dredging in 2019–2020, but the port authority hasn't recognised this 
• The Power Division argues the port's fee demand lacks legal basis 
• The channel's shallow draft (less than 6 meters) forces costly coal transfers via smaller barges

The Power Division and Payra Port Authority are at odds over Tk1,225 crore claimed by the latter from the Payra coal-fired power plant as maintenance fees. 

The dispute has escalated recently as the port authority pushes for settlement, while the plant operator Bangladesh-China Power Company Ltd (BCPCL) — run under the Power Division — says the fees were unfairly imposed by the port, according to minutes from a recent joint meeting of the power, finance and shipping ministries.

The port authority billed the plant operator Tk385 crore for maintenance of the Rabnabad Channel from 1 January 2021 to 6 November 2024. The plant operator uses the channel to import coal for its operations. 

Additionally, the port has demanded an extra Tk839.65 crore as an annual maintenance dredging levy over the same period, according to a letter the port sent to the plant operator on 14 August last year.

Citing a Statutory Regulatory Order (SRO) issued on 13 May last year, the port stated that the plant operator is required to pay a fee of $7.71 per tonne of coal imports.

However, the plant operator claimed that dredging of the Rabnabad Channel had not even begun when the power plant neared completion in 2019. 

To avoid financial losses, the operator spent $68.8 million of its own funds on dredging the channel between November 2019 and February 2020. However, the port authorities have yet to recognise this expense.

When asked, Rear Admiral Masud Iqbal, chairman of the Payra Port Authority, told TBS last week, "BCPCL was using its influence to avoid paying port fees. A gazette notification was issued for the significant amount BCPCL owed the port.

"When the port requested payment, BCPCL began delaying and providing misleading information, including inaccurate details about dredging activities." 

Masud Iqbal added that a committee, formed with secretaries of ministries concerned, is currently working on this issue, and the actual scenario may be revealed soon.

BCPCL, a 50-50 joint venture between Bangladesh's North-West Power Generation Company Ltd and China National Machinery Import and Export Corporation, was formed to develop and operate the plant, one of Bangladesh's largest coal-fired power projects.

The North-West Power Generation Company is a state-owned entity under the Bangladesh Power Development Board, which operates under the Power Division of the Ministry of Power, Energy, and Mineral Resources.

According to the Power Division, coal has been imported via Payra Port's Rabnabad Channel since the 1,320 MW power plant began operations in 2020. Amid the ongoing dispute over maintenance fees, the Rabnabad Channel remains unmaintained, limiting its use for large vessels carrying imported coal, which in turn raises costs for the Power Division.

Efforts to solve the issue 

To address the issue, Finance Adviser Salehuddin Ahmed, Power and Energy Adviser Muhammad Fouzul Kabir Khan, and Shipping Adviser Brigadier General (Retd.) Sakhawat Hossain held a meeting on 3 February this year, attended by top officials and secretaries from the three ministries. 

However, no progress was made during the meeting, according to sources familiar with the matter.

The interim government is increasing its reliance on BCPCL for electricity supply during the Ramadan and the summer season with plans to source 1,200 MW of electricity.

When asked about the issue, Power and Energy Advisor Muhammad Fauzul Kabir Khan told TBS on 11 February, "I held a meeting with the finance and shipping advisers regarding the matter. A committee, led by the finance secretary, has been formed to explore solutions. The committee also includes the Power Secretary and the Shipping Secretary. Based on its recommendations, the dispute between BCPCL and the Payra Port Authority will be resolved."

Power Division faces higher costs  

According to the Power Division, due to insufficient draft in the channel, large ocean-going vessels cannot directly dock at the port's main jetty. Instead, these vessels anchor at the outer anchorage, and the coal is transferred to smaller barges, which then transport it to the plant's jetty.

This has increased coal transportation costs, which in turn has raised power generation costs and government subsidies in the sector. This could potentially lead to exceeding the subsidy cap set by the International Monetary Fund (IMF) for the power sector.

The meeting minutes reveal that the Power Division is incurring financial losses in coal imports due to an inadequate draft of the port's Rabnabad Channel, which has led to rising electricity tariffs. 

Currently, the channel's draft is less than six meters, much lower to accommodate large ships. Although BCPCL requested the port to dredge the channel on 19 May, 11 September, and 30 October last year, the port authority did not take action.

If the minimum draft of the channel was 9.5 metres, the freight cost per ton of coal would be $20.45. With a draft of 8 to 9.49 metres, the cost rises to $26.50 per tonne, and if the draft is between 6.5 and 7.99 metres, the cost increases to $35.38 per tonne. Currently, the draft at Payra Port is less than 6 metres.

According to the Power Division, ensuring a minimum draft of 9.5 meters at Payra Port, up from its current draft, would save the government around Tk500 crore annually and reduce electricity tariffs by Tk0.50.

It highlighted that the increased coal import costs due to the low draft have already led to a significant rise in the government's electricity subsidy. If additional maintenance fees, as demanded by the port authority, are paid, the electricity tariff would increase even further.

Port fees have no legal basis: Power Division 

According to the Power Division, the SRO on which the Payra Port Authority is basing its demand for additional fees does not specify when the fee will be effective, and there is no legal basis for retroactively charging this amount. Furthermore, the department argues that the law does not allow for the imposition of such fees.

The Payra Thermal Power Plant pays fixed charges for using the port's channel, with the Bangladesh Power Development Board (BPDB) paying an average of Tk160 per tonne of goods to Payra Port. Despite operating its own jetty, the power plant is still required to pay 10% of the coal handling, occupancy, and berthing-unberthing charges to Payra Port.

During the advisers' meeting on 11 February, the Power Division officials said the government's annual subsidy to the power sector is around Tk40,000 crore. While channel maintenance is not the responsibility of the Power Division under current laws and allocations, imposing this fee will increase the subsidy demand further. This would make it impossible to meet the International Monetary Fund (IMF) obligation to limit subsidies in the power sector.

The Payra plant, located in Kalapara Upazila of Patuakhali District, consists of two units, each with a capacity of 660 MW. The first unit commenced commercial operations on 15 May 2020, followed by the second unit on 8 December 2020.