Tejgaon industrial belt is just four kilometers away from Bangladesh Secretariat and within a kilometer of the Prime Minister's Office. Let's start with the relentless effort of a readymade garment (RMG) entrepreneur of the industrial zone for quality power supply. He is one of the leading garment entrepreneurs and also a top leader of Bangladesh Chamber of Industries (BCI). His factory had problems relating to loadshedding and low voltage, which is very common in Bangladesh. To overcome the problem, he took all the steps suggested by the power distribution company, DESA, but to no avail. If a motor gets out-of-order today due to low voltage or power fluctuation, the next day it may be another equipment to suffer the same trouble. Moreover, sitting idle for 2-3 hours during power outage was everyday's affair. Pressure from buyers and tension for timely shipment had made the factory owner distracted. At last, he took a vital decision one and a half years back. No more dependency -- he will produce power on his own. Investing around Tk 1.25 crore, he set up a power production system. Now he has no more tension as he has own power supply unit for uninterrupted running of his factory.
When asked, the entrepreneur said he had to count Tk 26-30 lakh each month as electricity bill for DESA. Each kilowatt-hour (kwh) would cost him around Tk 4.50. He retains the power connection from DESA and pays the minimum monthly charge. Cost of his own power is Tk 2.62 for each kwh, which is half of the DESA's price. He had the ability to make investment for power, so he was able to do it. But, there are many small and medium entrepreneurs who do not have the ability to do the same after putting money for their industrial units. Then who will rescue them?
The problem does not end here. Let's take an example from Dhaka EPZ. Some industries had taken initiatives to have own power generation systems after failing to get quality electricity supply from the Rural Electrification Board (REB). But they are also in a trouble this year due to lack of gas supply at required pressure. Tapan Kumar Majumder, an official of Korean company Kung Keng Textile (Bangladesh) Co. Ltd, said: “We were compelled to invest for power generation after experiencing a lot of troubles for more than 5-6 years in getting quality power supply from the REB. For last couple of months, again we started facing trouble due to low pressure of gas supply.” He however said they are not facing any major problem over gas pressure right at this moment.
Not only Kung Keng, three other industries, out of total 70, in Dhaka EPZ are now generating their own electricity. They don't receive the REB supply. The others who depend on the REB, also have stand-by generators to face loadshedding.
Talking to Energy & Power, Executive Chairman of BEPZA Brigadier General (retd) Zakir Hossain said the present demand of power in Dhaka EPZ is 19 MW and 30 percent of the generation comes from captive power. In the near future, the total demand for power in Dhaka EPZ would stand at 30 MW. Brigadier Zakir said they were constantly pursuing with the REB for smooth power supply and proper voltage, but they are unable.
BEPZA Member (Engineering) Abu Reza Khan said they talked with REB on the issue several times, but all discussions came out fruitless. It was informed from REB that they get PDB-produced power from PGCB. But the PGCB cannot supply power at a proper voltage at the inlet point. As a result, it is impossible to supply power at a proper voltage.
A similar picture prevails for industries in adjoining Savar, Sripur and Gazipur areas and elsewhere in the country. Abdur Razzak Razu, Managing Director of Pandora Fashion at Gazipur Boardbazar said it was not possible for them to run industry depending on power supply from the REB. That is why he managed a generator.
Razu is not alone facing problem. Biswas Group has knitting and dyeing finishing factory at Rajfulbari in Savar. Its Chairman and Managing Director Moinuddin Biswas said they would not have any problem if REB supplies quality power at the cost of high price. “I think that if REB does not take any initiative to generate power for this area, the problem would not be solved.” He was echoed by Nazmul Alam of Blooming Del, Alam of Dolphin Knitting and Col (retd) Noor Khan of Blue Seal.
Apart from the EPZ, there are industrial belts around the capital city. Adjacent to Dhaka, there are Tongi, Gazipur, Savar, Keraniganj and Narsingdi industrial areas. There is a non-government EPZ at Savar apart from government-owned EPZ. Investigation revealed that loadshedding in Dhaka EPZ is not too much at this moment. But, the big industrial belt around the capital has acute problem of power shortage. The sufferings for industries in Savar and Narsingdi are more than the other areas with the growth of power demand in these areas is 25-30 percent, according to sources in the PBS. At the same time, some 100-120 MW power is awaiting to be connected in these two areas. Since the Dhaka PBS 1 and the Narsingdi PBS 1 are not able to meet the present demand, they took a go-slow policy to meet fresh demand.
During a visit to Savar, Dhaka EPZ General Manager Kamal Akhter said that the REB had promised them to ensure quality power supply at the beginning. But now they are unable to do that. In the meantime, REB had said that they would be able to supply power from REB's 11 MW (Power Station of the Summit Group) near Ashulia to the EPZ. But, it was not done. For this power station, power supply and voltage situation at the adjacent areas is good. Officials of Teesta High Fashion at the EPZ, which depends on the power supplied by the REB, said situation over power fluctuation has improved, but still there is low voltage and frequent loadshedding.
The north, north-west and the whole of west of capital Dhaka are now gradually-expanding industrial area. Apart from EPZ, a non-government export processing zone has been developed in this area. Different types of small and medium industries are being set up here almost everyday. At the same time, the government has taken an initiative to set up an IT Village at Kaliakoir. A new tannery-village has been developed at Hemayetpur in Savar. But if the existing power-supply situation continues, existence of the present industries would be a tough challenge, let alone establishing new industries.
Dhaka PBS 1 President Kazi Humayun Kabir, Director Waqilur Rahman and General Manager Sarwar Hossain narrated the whole scenario of power supply. Seventy four percent of their customer are in industries and 20 percent residential and others, including four percent commercial and two percent in irrigation. In 1983, system loss was 17 percent when DESA was in charge of this area to distribute power. At present, system loss of REB is 9.66 percent. The PBS 1 is now distributing 178 MW power in Savar area. And they said demand for another 30 MW power is now lying with the PBS. However, the PBS General Manager said they were unable to give new connections because supply for new demand is not available.
According to the projection of the PBS Dhaka-1, the total demand for power of the area would stand at 222 MW next year and it would be 347 MW by 2008, 542 MW by 2010, 780 MW by 2012 and 1,364 MW by 2015. This is equivalent to the demand of the areas under DESA and DESCO in the capital. PDB officials said the tannery industries, being shifted now, will require 60 MW. Besides, the planned Kaliakoir IT village will require 30 MW. When the Dhaka EPZ will operate in full swing, the demand for power will stand at 30 MW as against 19 MW existing demand.
At present PBS Dhaka-1 is providing 178 MW power while another 100 MW power is coming from captive generation in its own area. Gradually dependency on captive generation is increasing. For example, 70 percent power supply in the Beximco industrial zone comes from its own generation. As dependence on captive power is being increased, pressure for gas is also being raised. As a result, the government is facing setback often over the gas supply and its desired pressure. On the other hand, the diesel-based industries are facing the added problem as their production cost is higher.
BEPZA Executive Chairman, Member (Engineering) and industrialists demanded that the REB should arrange a special power production system for this area. The Executive Chairman of BEPZA said they came to know that RPCL is going to set up a 450 MW power station and it should be implemented immediately. Total power generated from the plant should be supplied for the industrial zones in Savar and its adjoining areas to resolve the crisis of power.
Dhaka PBS 1 officials think that they have the financial capacity to invest for power generation. They also believe that quality power supply is not possible in Savar without having own generation system. That is why Dhaka PBS 1 and Narsingdi PBS 1 have signed agreement with RPCL to set up the Dhaka North 450 MW power station. They think that if this power station is not set up, they are going to lose their industrial clients. Because, they would go for captive generation for uninterrupted power supply. The General Manager of the PBS said the way their demand is increasing, it would not be possible to meet the requirement if they do not go for self-power generation.
Almost adjacent to Dhaka, Narsingdi is now an expanding industrial zone. At present Narsingdi Palli Biddyut Samity 1 is providing supply to meet the entire demand in the area. Its area is expanded from Shitalakhya to Meghnaghat. They are supplying power to Bandar, Sonargaon and Araihajar upazilas of Narayanganj district and district headquarters (partial) and Palash upazila of Narsingdi district. At present, 175 MW power is being supplied in the areas. If new connection is provided, the demand would increase by 30 MW more at the moment. On average, the area is facing 2-3 hours of loadshedding everyday. On the other hand, there are 100 MW captive generation at present in the PBS area. If the planned Dhaka bypass is constructed, a new industrial zone would be developed here. The entrepreneurs have already started working on it and when completed, more 60-70 MW power would be required in this area.
Energy & Power talked to some textile mill owners in Narsingdi area. The Managing Director of Haris Textile, Haji Haris said they are facing tremendous problems due to low voltage and loadshedding. The Managing Director of AH Sizing, Shawkat Ali said the local PBS promised to set up a 450 MW power plant and if it is set up, there would be no power problem. But who knows if it would come to being at all. Yakub Ali, Managing Director of Confidence Textile said not only his industry, all the industrialists became hostage to power problem, which needs an immediate end.
Few years back, PBS had set up a 10 MW power station while the demand in the locality has increased to 35 MW over the last one and a half years. As there are private generation systems, power supply in Madhabdi and adjacent areas was possible at an almost proper voltage.
Talking about the power supply situation of the area, Narsingdi PBS's General Manager Golam Murtoza said they are facing huge problem to meet the existing demand. There are a good number of applications for connection lying in his office. The demand in this PBS area has increased by more than 25 percent. He thinks that additional demand cannot be met without the own generation of RPCL of the REB. Keeping this in mind, Dhaka PBS has invested for the Dhaka North Power Plant.
Not only the above areas, there is a severe crisis for quality power supply in almost all the industrial areas of the country. According to a research conducted by Nexant and financed by USAID, Bangladesh has been counting a loss of industrial production worth US$ 778 million a year due to lack of quality power supply. As a result, industrial growth was 11.54 percent less or growth 1.72 percent less during the 2000-01 fiscal year. According to their research, 94 percent power outage took place in an unplanned way. And only six percent outage was in a planned way. It says 14 percent industrial units are not dependent on utility for power. And 74 percent industries have standby generators to remain safe from power outage. For this, country's industrial sector is compelled to invest an additional US$ 4.5 million investment a year.
Reazun Nabi, Director of Beg International, engaged for about two decades in supplying textile machinery, said the entrepreneurs earlier seldom talked about purchasing generators. Nowadays, not a single entrepreneur thinks about setting up an industry without generator. As a result, industrial investment has increased by 10-15 percent.
According to a study of Bangladesh Enterprise Institute, the inadequate and unreliable power supply has an adverse impact on economic activities and constraints economic growth. “Extensive loadshedding from time to time, particularly during peak hours, normally disrupts industrial production, thus affecting the country's external competitiveness. Entrepreneurs have been forced to invest in stand-by generators, which raise production costs. Captive generation by the private sector has gone up considerably, reportedly to around 600-700 MW,” said the BEI study.
A World Bank study on “Cost of Electricity Outage” estimated that unplanned outages due to poor maintenance and fluctuations in frequency and voltage due to outdated management infrastructure led to about US$ one billion in lost industrial output annually for about 0.5 percent in GDP growth. “Competitiveness is further eroded by need to maintain backup generators due to unreliable supply,” said the World Bank study.
On the other hand, the Investment Climate Survey (ICS) conducted by the BEI in collaboration with the World Bank found that enterprises in the study reported that they experience power outages and surges about 250 days per year, on average with many firms reporting outages and surges everyday they operate. “These power problems impose real costs on firms.”
According to the ICS, 72 percent of the local enterprises reported that they had a generator while only 42 percent of firms in Pakistan and 27 percent of enterprises in China reported the same. “Relying on generators, however, is costly, while firms report paying about four taka per kilowatt-hour (KW/h) from the national grid, they plan more than six taka per KW/h to use their own generators -- nearly 50 percent more than that cost of purchasing electricity from the grid. Moreover, generators are not cheap; firms tend to pay more than US$ 20,000 for their generators, though some firms buy very small generators for under US$ 1,000 and a few report purchasing extremely powerful generators for more than US$ 500,000.”
“Thus, even if direct losses from power outages amount to only three percent of production, it is clear that the true costs of a poorly-performing grid are much higher. To maintain production, firms spend large sums both on ensuring that they have their own generation capacity and on using it. These backup systems impose costs on firms that firms in few other countries must bear, quickly undermining cost advantages that they might otherwise enjoy,” said the BEI study on “Reducing the Cost of Doing Business in Bangladesh”.
Similarly the ICS said: Underdeveloped power sector is a serious constraint on business operations and growth in Bangladesh. Only four percent of enterprises reported that electricity posed no constraint on business operation and growth, fewer than in either Pakistan or China. In Bangladesh, the median estimate of lost sales due to power outages was one percent, compared to zero percent in China.
Regression results demonstrate that even controlling for industry's fixed effects and firm characteristics, sales and investment both suffer as the number of power disruptions increases. “Indeed, an average firms report losing more than three percent of their production due to problems from the electricity grid,” the survey added.
It said: unplanned outages are always costlier to the consumers than planned outages. Moreover, advanced industries such as the semiconductor industry require not only continuous electricity supply but also high quality supply where the voltage and frequency of supply are properly maintained. Although, it said, reliable estimates are not available various manufacturers association indicates that production could be about 10 percent higher if power supply was available without disturbance or loadshedding.
Regarding increase of power production, the government has highly ambitious plan. But, progress over last few years, it is hard to believe that the government would be able to complete even half of its plan. In the meantime, dilemma in decision making by the government, setting up of a 450 MW power plant in Sirajganj has been cancelled even after finalization. More three-four projects are now dwindling in complexities made by either the government or the donors.
In a bid to provide power in the capital's adjacent industrial areas, a good initiative was taken by the government to set up Dhaka North 450 MW power station. RPCL, a company of the REB wanted to set up it. Dhaka and Narsingdi PBSs also provided the equity of investment for setting up the power station. German donor agency KfW came up to invest in this project. But, ADB, which earlier had suggested to bring REB to power generation and had formed Rural Power Company Limited to set up Mymensingh power station, now is raising question as to why RPCL will go for power generation. At the same time, REB's main donor USAID also echoed the ADB. As a result the issue is now hanging in the balance.
But PBS leaders/officials engaged in power supply in the industrial areas as well as the entrepreneurs think that if self generation system of the REB is not ensured, quality power supply in the industrial areas would be a far cry. That is why everybody in the sector thinks that now the question is not how it will happen, the thrust should be materializing it. It is not expected that power generation system would be halted due to indecision by the donors or the government, keeping the industries at stake.