How to reduce import dependence in the energy and power sector
Achieving self-reliance in the energy and power sector requires proper planning and vision. Strengthening national institutions to expedite gas exploration, and ensuring fair and economical use of internal resources can be a starter
Due to rising import costs, the country's dollar reserves are dwindling. As a consequence, Bangladesh Bank has issued restrictions on importing non-essential goods to safeguard reserves. Meanwhile, the export revenue from the garment industry and expatriate workers' remittances have not seen an expected growth.
Despite the restrictions, the import cost is increasing due to the high demand and price of essential goods. The biggest challenge now is maintaining the supply of 60% import-dependent energy ie, oil, LNG (liquefied gas), and coal to meet the base electricity supply needs.
The price of crude oil per barrel had almost doubled in July due to the war in Ukraine but is currently on a downward trend. Alarmingly, LNG and coal prices look to increase more than that of oil. Due to the continuously increasing demand, oil, LNG, and coal need to be imported in large quantities.
Even though we have enough installed capacity of power plants, the energy price hike resulted in the power generation being reduced by 1,000-1,500 MW to allay the pressure on foreign currency. As an outcome, a wide gap has been observed between supply and demand, creating a complicated situation in power generation.
It is expected that several coal-based power plants will be commissioned by this month (September). Then winter will come, the demand will decrease, and the country will be freed from load shedding again. But can we rest assured that we won't have any more energy crises in the future and we will be able to ensure uninterrupted and affordable electricity down the line?
We fell into this situation because we do not have enough foreign currency reserves. How long can we hold onto the garment industry like this? How long can we depend on remittance from expatriates without sufficiently creating skilled labour? Will we not face any challenges in the future in these two biggest foreign currency earning sectors?
Demand will increase day by day in this densely populated country. So shall we go for unbridled imports to serve a few beneficiaries, or look to develop the infrastructure to achieve self-reliance in the energy and power sector?
Let us discuss how to reduce the import dependence in the energy and power sector. First, let us come to the fuel sector.
Bapex should be strengthened to increase land and offshore exploration for gas extraction. Strict regulations should be imposed to prevent the wastage of oil, gas and coal. Public transport services should be increased and the use of small and private vehicles should be decreased. The use of electric vehicles should be promoted.
Waste-to-energy production must be implemented, and the use of renewable energy must be adopted more widely especially to replace diesel-run irrigation pumps. The public should be actively engaged in the culture of fuel and electricity saving.
The power sector is expanding day by day. By 2030, the country's electricity demand will increase to about 20,000 MW. At present, there is a total of 154 power plants under government and private ownership. The number of these plants will almost double by 2030.
The government of India has a state-owned heavy industrial enterprise called BHEL, which is making all these heavy equipment themselves for power generation. These include steam generators, turbines, alternators, transformers, pumps, cooling towers, etc. They reached an agreement long ago regarding technology exchange with many renowned construction companies including General Electric, Siemens and Mitsubishi.
They are also exporting these products. Now they have branch offices in 86 countries. I understand the fact that India is a big country, and it is in a better situation vis-a-vis raw materials, technology, and demand. But the size of our demand is also increasing. In this case, we can easily make steam generators, transformers, pumps and cooling towers locally both for power generation and other industries.
Some private companies in the country already manufacture distribution transformers. This is saving a lot of foreign currency and creates employment as well. The government can decide the right course of action by discussing with the stakeholders what needs to be done to be able to compete with India and China.
It is more or less known why public companies such as General Electric Company are failing. Furthermore, when the government managed the Bangladesh Machine Tools Factory Limited (BMTF), it incurred huge losses every year. However, once the management body was shifted to the Bangladesh Army, it became profitable. Now special attention needs to be paid to the private companies related to the power sector so that they can come forward.
In this case, it is worth considering acquiring and transferring technology by making agreements with India's BHEL and kindred companies with any capable industrial entity in the country. In my opinion, this process will be easy and sustainable. If necessary, an agreement can be made directly with General Electric, Siemens or Mitsubishi later.
The building of a power plant is 100% import dependent. Even the maintenance is done by the original builder. It requires spending approximately $10-15 billion from the reserves every year. If our engineers can construct the Padma bridge, why can't they build such kinds of machines?
Achieving self-reliance gradually in the energy and power sector requires proper planning and vision. Here, it is very important to nurture and retain the patriotic mentality of all the key players, abolish the 'exemption of liability sample clause' (which essentially means the Company shall not be liable for compensation with regard to any damages sustained by the Partner], and ensure fair and economical use of internal resources.
It is necessary to ensure proper management and good governance and ensure a congenial environment. Only then will any organisation be successful.
Today, 50 years of independence have passed, but we have not succeeded in devising a power and energy master plan without foreign assistance. It is important to think about how to move this sector towards self-reliance by avoiding those who are forcing import-dependent fuel and an externally leveraged power sector. It is not possible to build a developed and prosperous Bangladesh by keeping this important sector under fragile conditions.
Dr Md Shafiqul Islam is a professor at the Department of Nuclear Engineering, University of Dhaka.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.
