The government is moving slowly to allow new private power plants to import fuel as it will deprive the Energy and Mineral Resources Division (EMRD) of huge revenue due to the tax benefits attached to private sector fuel import.
Sponsors of six private power plants are awaiting the final clearance from Bangladesh Petroleum Corporation (BPC) for fuel import to operate the plants. The Power Division earlier gave the go-ahead to the private sector for fuel import with BPC’s consent.
“If fuel import can’t be started immediately, it will be impossible for the private power plants to continue operation after March 2017,” Bangladesh Independent Power Producers Association (BIPPA) said in a recent letter to the Power Division.
BPC is yet to sign any agreement for fuel import by the private power plants though several months have elapsed since the state-run agency was approached in this regard, a BIPPA member said.
He said the power plants are facing difficulties in getting the clearance to import Heavy Fuel Oil (HFO) needed for their operation.
BPC is now the sole authority to import and market all kinds of petroleum fuels.The government allowed the private sector to import fuel for electricity generation in 2011 when the fuel prices were too high in the international market.
The private sector has also been enjoying supplementary duty (SD)- and VAT-free fuel import facilities for electricity generation since then.
The cost of imported HFO is Tk 22 per litre against the BPC’s price of Tk 42 per litre.
The Power Division, however, included four terms and conditions in the import permission that require BPC’s involvement. As per the conditions, to import fuel, the power plants or their nominated agencies need to sign agreements with BPC. The conditions require the state-run agency to nominate one of the fuel distribution companies to monitor the use of imported HFO. Power plants will also have to submit their HFO consumption report to BPC and fuel importer should submit import documents and quality certificates to BPC within five days of import.
The private power sponsors said it will be very difficult for them to import fuel in time after meeting all the regulatory formalities.
The also urged the authorities to allow fuel import without further delay to ensure timely and adequate power generation in the private sector.
The Prime Minister’s Office (PMO) earlier sought opinions from the EMRD to revise the 42-year old Bangladesh Petroleum Act-1974 in order to allow Bangladesh Power Development Board (BPDB) to import fuel for supplying to both public and private-sponsored power plants.
An amendment to the Petroleum Act will empower PDB to import HFO and diesel for electricity generation.
According to PDB, 46 out of 105 power plants in the country run on liquid fuel. The PDB would require around 9183 tonnes of fuel for generating 3,712 megawatts of electricity from those fuel-fired plants.
PDB spends Tk 4594 crore a year to procure fuel from BPC. The cost would come down to Tk 2407 crore if the government allows it to import fuel under its own arrangement.
On September last year, the Power Division and the Energy and Mineral Resources Division- sat to settle the issue on handling the matters on fuel import for electricity generation.
Since then fuel import in the private sector remains suspended since then. The volume of power import in the private sector has been around Tk 2,705 crore a year.
The Power Division wants to allow the private sector to import tax-free HFO that reduces electricity generation costs significantly whereas the energy and mineral resources division (EMRD) wants to retain its previous sole authority to allow import of furnace oil by paying tax.
Currently, 19 power plants with the combined electricity generation capacity of 1686.34 megawatts use HFO. They require 2.6 million tonnes of furnace oil annually.
Of the 19 power sponsors, a total of 14 electricity producers arrange their own fuels taking advantage of nine percent service charges as well as tax waiver facilities on around 1.3 million tonnes of furnace oil.