Inadequate power is one of the key constraints to growth in Bangladesh. Hence, the Government has made reforms in power sector a top priority to ensure reliable power supply. The World Bank is supporting the Government’s reform initiatives through the Power Sector Development Policy Credit (Power DPC). The reforms cover power sector financial restructuring, rural electrification, development of privately financed power generation plants, corporatization and commercialization of electricity service delivery in BPDB’s South Zone (Chittagong and Comilla, and other areas), and regulatory reforms.
The USD120-million credit for the Power DPC was disbursed in full in June 2008, which was also approved in the same month. The Power DPC like the other development policy credits was disbursed directly to the budget. The development policy credits can be used for general expenditures. A World Bank team visited Dhaka recently to discuss with the Government the implementation progress of the reforms, and to assess how successful the credit was in supporting critical reforms in the sector.
The reform has progressed in many areas. However, some reform items – particularly procurement processes related to large customer meters in South Zone and to the Bibiyana power plant – have experienced delays. A plan for financial restructuring of the power sector has mostly completed, and the Government is now in a position to implement a range of non-price restructuring steps that, if complemented by future price adjustments, will be critical to the sustained financial health of the sector. The Government has also supported the Bangladesh Power Development Board (BPDB) through regular budget transfers, helping to ensure that key gas and power suppliers to BPDB are paid in full, on time.
The Government has taken steps to fully operationalize the South Zone Power Distribution Company. Once the Board meeting takes place in August 2009, South Zone would start functioning as a corporatized subsidiary of BPDB. It will be then able to make progress on a project to install automated meters for its largest customers, which will stabilize 50% of the new company’s revenue base.
The Government has re-committed itself to the transparent procurement of new independent power plants (IPPs), and has requested World Bank support for recruitment of a transaction team for development of the Bibiyana IPP. However the World Bank has expressed concerns related to the operationalization of BERC. To ensure autonomous functioning of BERC, the transfers and/or removals of members of the commission needs to be kept in minimum. The Government has re-affirmed its commitment to taking additional steps in all of these reform areas.
The World Bank will complete its assessment of the Power DPC in September. The World Bank is a committed partner and a significant financier to improve the power situation in Bangladesh. The World Bank financed projects in the power sector are the $350-million, gas-to-power Siddhirganj Peaking Power Project, the $220-million Rural Electrification and Renewable Energy Development (RERED) project, the Power Sector Development Technical Assistance (PSDTA) project, and the Haripur Power Project. The Government and the Bank are discussing the possibility of new projects in urban distribution, energy efficiency, and natural gas production and transmission that could help address the problems of the energy sector.
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