How autocracy powered aggressive fossil fuel expansion in Bangladesh

Emran Hossain

Dozens of private investors in Bangladesh’s power sector saw their earnings swell by 30 per cent compared with three years ago just because taka lost its value against the dollar.

The current exchange rate for a dollar is Tk 119, up from Tk 84 three years ago. The power investors had secured deals that allowed them to realize capacity charges in dollars despite making their investments in taka.

Capacity charge is the controversial provision under which the immediate past Awami League government consented to pay a maximum return on private investments regardless of electricity generated.

The payment of the capacity charge marked an increase of over 100 per cent over the last three years. The increase was also caused by the addition of new power plants, mostly with the capacity charge entitlement.

Bangladesh’s power sector expense rapidly increased despite energy prices on the world market falling by up to three-fourths, prompting the country to increase its power subsidy allocation 158 per cent over the last three years, in addition to frequently increasing energy prices.

‘Bangladesh’s power deals were uniquely designed to benefit a vested quarter, and they were replete with money-making loopholes,’ said Hasan Mehedi, member secretary, Bangladesh Working Group on Ecology and Development.

The power sector is among the few areas blamed by energy experts for plunging Bangladesh into its current economic crisis by draining dollars. The economic crisis was a major contributor to the mass uprising that early last month toppled the autocratic regime of Sheikh Hasina.

The Sheikh Hasina regime saw the power generation capacity rise more than sixfold since she assumed power in 2009 with about 150 power plants set up under an indemnity law, ‘Quick Enhancement of Electricity and Energy Supply Act, 2010,’ which was introduced for two years but later extended in four phases for 16 years. Under the law, power plants were established without any bidding with deals that invariably remained a secret.

Independent reports, however, revealed the power plants were established without having proper environmental impact assessments or through the deliberate manipulation of data while providing investors with numerous means to inflate their profits.

The aggressive expansion of the power sector, which saw an investment over about $33 billion in generation alone, evicted thousands of people, depriving them of their livelihoods and throwing them into an uncertain life while destroying the environment and biodiversity.

One of the first steps that the interim government took after assuming power last month was to get an expert committee formed to evaluate the power projects passed under the indemnity law during Sheikh Hasina’s rule. The committee started its work last week.

Some ongoing power projects awarded under the law have already been cancelled.

A glimpse into the indemnity act

The law handed unprecedented power to the minister for power and energy, which was Hasina herself, enabling her to award power and energy deals without any tender while ensuring that her decisions could not be challenged in any court of law.

No legal action can be taken against any employees and officials who have operated under the law or its subordinate rules or any general or special orders given under it, states Section 10 of the law, which considers all actions done under it have been performed in good faith.

After taking permission from the minister, subsection 2 of Section 6 states that a special committee can contact and negotiate with a limited number of parties or a single party to process any procurement or investment proposals in the power and energy sector.

The special committee was comprised of top officials of the energy ministry and the state-owned power end energy entities.

‘The law should not have existed in the first place. The law violates existing procurement practices followed by governments across the world,’ said Ijaz Hossain, an energy expert.

Some of the controversial power deals

The controversial Adani Group recently grabbed headlines, demanding dues that the Bangladesh Power Development Board said were inflated by 32 per cent thanks to its unjust power purchase agreement negotiated under the direct supervision of Sheikh Hasina and the Indian prime minister Narendra Modi.

The Adani group chairman, Gautam Adani recently demanded $800 million in outstanding bills, which the BPDB said was actually $547 million. The power purchase agreement allowed Adani to charge for coal with a calorific value of 6,322 kcal/kg, though it was burning coal carrying a calorific value of 4,600 kcal/kg at its 1600 MW Godda power plant in Jharkhand.

The price of coal varies greatly depending on its quality to generate energy. The price of a ton of coal on the Indonesian index ranges from $50 to $130 depending on its ability to produce energy. The lowest quality of coal on the Indonesian index costs $31.78.

The Adani was also allowed to combine prices of coal on the Indonesian and Australian indexes and average them to claim a price from Bangladesh, a rare arrangement.

The Australian coal is of very high quality and more expensive than the Indonesian coal. Adani imports coal from Indonesia entirely. In February last year, Adani demanded about $400 for each tonne of coal, though the same coal was available for $250.

Adani was also spared the discount provision, which is a cut on coal price in case of its sudden price hike. Globally, power deals up to a 55 per cent discount.

The 1320 MW Banshkhali power plant, owned by Bangladesh’s controversial SAlam group, received twice as much capacity charge as its peers last year, though it remained out of operation because of its inability to manage coal.

Energy experts said that the deal apparently allowed Banshkhali to realize capacity charges even though it was out of operation for the plant’s fault, such as technical difficulties.

The Banshkhali power plant was constructed with an EIA that the Helsinki-based Centre for Research on Energy and Clean Air revealed was replete with false information and unlawful omissions, which could be the result of deliberate manipulation or engaging people lacking a minimum understanding of the EIA. The EIA report completely ignored the health impacts of the Banshkhali power plant and the issue of mercury pollution.

The power plant would emit 5 times as much sulfur dioxide and particulate matter and 10 times as much nitrogen oxide as allowed in China, said the CREA analysis. The plant was built with a majority Chinese investment.

The construction of the plant evicted thousands of families, educational and religious institutions, markets, and even a government hospital, triggering spates of protests that were suppressed using lethal force, killing at least 11 people by the police.

The government has already waived stamp duty of about Tk 3,170 crore on land lease agreements and financing documents for the power plant.

The controversial 1320 MW coal-fired Rampal power station, a joint venture between Bangladesh and Indian governments, was built dangerously close to the world’s largest single-tact mangrove forest—the Sundarban. The majority of the land of 1,834 acres needed for the plant was previously used for agriculture and shrimp cultivation.

The power plant faces frequent shutdowns reportedly from using substandard machines and employed only a few of the people it rendered jobless.

The Rampal power plant would cause at least 6,000 premature deaths and low birth weights of 24,000 babies during its 40-year life, a Greenpeace study had estimated.

The Sundarbans have three wildlife sanctuaries, a UNESCO World Heritage Site, and a Ramsar bird conservation area. In 2010, the forest was estimated to contain carbon at nearly 56 million metric tons. The forest is also a natural protection wall for Bangladesh and India against cyclonic storms, saving millions of dollars of land loss and property damages every year, and the lives of thousands of people.

The CREA in another study had revealed that authorities in the Matarbari phase-1 project allowed pollution 25 times the levels allowed in India, China, and the European Union.

Then there were power plants that did not produce power for years but stayed on the list of power plants in operation, giving the wrong impression about installed generation capacity.

For instance, built by CLC Power Company, a sister concern of Maisha Group, owned by former ruling Awami League lawmaker Aslamul Haque, who died in 2021, the furnace oil-based Bosila power plant began commercial operation on February 22, 2017. The power plant, supposed to retire on February 21, 2032, first suspended its operation on December 18, 2019. The power plant did not generate any electricity after March 17, 2020, official documents showed.

Built by PowerPac Holdings Limited, a sister concern of Sikder Group, a business group embroiled in controversies over shady loan deals, Jamalpur 95MW commenced its commercial operation on November 29, 2016. The furnace oil-based power plant, supposed to retire on November 28, 2031, closed on November 10, 2021. In 2021–22, the power plant operated only 1.8 per cent of its capacity.