Bangladesh is progressing through a phase of development where automation is the key to its economy and business. As the country continues to industrialise the importance of power generation and electricity supply becomes a key government priority.

Power Industry in recent times

At present, 48.5% of the total population of Bangladesh is enjoying the electric facilities.  As of April 2010, the total numbers of transmission and distribution lines are recorded to 8,359 km and 266,460 km respectively. However, 53,281 villages have been electrified so far. In Bangladesh per capita generation is 220 KW hr which is comparatively lower than other developed countries in the world.

Recent Status:

Figures other than Installed Capacity and Maximum Generation are of June 2010.

Source: Bangladesh Economic Review 2011(Bangla version), www.mof.gov.bd

Public and private sector produces 63% and 37% of electricity respectively. Public sector produces electricity through Bangladesh Power Development Board (BPDB), Ashuganj Power Station Company LTD (APSCL) and Electricity Generation Company of Bangladesh (EGCB). On the other hand, private sector produces power through small independent power producers and rental that government buys at a constant price. BPDB individually produces 46% of the total production.

Electricity Production, 2010, by Sector

¹Bangladesh Power Development Board

²Ashuganj Power Station Company Limited

³Electricity Generation Company of Bangladesh

⁴Smal Independent Power Producer

⁵Rural Electrification Board

Source: Power and Energy Sector Development Roadmap (June 2010), Ministry of Finance

Electricity Production (Public), 2010, by %

Bangladesh Power Development Board

Ashuganj Power Station Company Limited

Electricity Generation Company of Bangladesh

Source: Power and Energy Sector Development Roadmap (June 2010), Ministry of Finance

Electricity Production (Private), 2010, by %

Source: Power and Energy Sector Development Roadmap (June 2010), Ministry of Finance

Raw material used to produce electricity, 2010, by %

Source: Power and Energy Sector Development Roadmap (June 2010), Ministry of Finance

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Government Vision for the Power Industry

Electricity is a key ingredient for the socio-economic development of the country. The government has given top priority to development of the sector considering its importance in the overall development of the country. The government has set the goal of providing electricity to all citizens by 2021. Adequate and reliable supply of electricity is an important pre-requisite for attracting both domestic and foreign investment.

As the power sector is a capital-intensive industry, huge investments are required in order to generate addition to the capacity. Competing demands on the government resources and declining levels of external assistance from multilateral and bilateral donor agencies constrained the potential for public investment in the power sector. Recognizing these trends, the government of Bangladesh amended its industrial policies to enable private investment in the power sector.

The Power Cell, created under the Power Division of Ministry of Power, Energy and Mineral Resources, received the mandate to lead private power development. The government is strongly committed to attract private investment for installing new power generation capacity on build-own-operate basis.

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Fiscal Incentives for Private Power Companies

A number of fiscal incentives are provided to the private power companies. Some of them are as follows:

• Exemption from corporate income tax for a period of 15 years.
• Allowed to import plant and equipment and spare parts up to a maximum of ten percent (10%) of the original value of total plant and equipment within a period of twelve (12) years of commercial operation without payment of customs duties, VAT and any other surcharges as well as import permit fee except for indigenously produced equipment manufactured according to international standards.
• Repatriation of equity along with dividends allowed freely.
• Exemption from income tax for foreign lenders to such companies.
• The foreign investors will be free to enter into joint ventures but this is optional and not mandatory.

Source: Private Sector Power generation Policy of Bangladesh, Ministry of Power, Energy and Mineral Resources

Facilities and Incentives for Foreign Investors

There are number of  facilities and incentives would be provided to the foreign investors. Some of them as follows:

• Tax exemption on royalties, technical know-how and technical assistance fees, and facilities for their repatriation.
• Tax exemption on interest on foreign loans.
• Tax exemption on capital gains from transfer of shares by the investing company.
• Avoidance of double taxation case of foreign investors on the basis of bilateral agreements.
• Exemption of income tax for upto three years for the expatriate personnel employed under the approved industry.
• Remittance of up to 50% of salary of the foreigners employed in Bangladesh and facilities for repatriation of their savings and retirement benefits at the time of their return.
• No restrictions on issuance of work permits to project related foreign nationals and employees.
• Facilities for repatriation of invested capital, profits and dividends.

Source: Private Sector Power generation Policy of Bangladesh, Ministry of Power, Energy and Mineral Resources

Under the Private Sector Power Generation Policy, so far power plants  with a capacity of 1,290 MW have been established and are under operation. Moreover 1,590 MW of electric power are planned to be generated in the near future.

A list of existing Independent Power Producers (IPPs) is shown here:

* Based on indicative Gas price: 2.40 US$/GJ.

Source: Ministry of Power, Energy and Mineral Resources

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Power Industry Development Plan

In order to realize the government’s vision to provide electricity to most of the population at a reasonable price and to achieve overall socio-economic development of the country, the government of Bangladesh has initiated a Power and Energy Sector Development Roadmap (2010-2021) which targeted to produce 8,500 MW by 2013, 11,500 MW by 2015 and 20,000 MW by 2021. However, to ensure overall and balanced development of this sector government has taken various plans in terms of duration. The plans have been developed based on a techno-economic analysis and a least-cost option. These plans include balanced development in generation, transmission and the distribution system to achieve a desired level of reliability of supply. A summary of the development plan is given as follows:

Short Term Plan (2011)

According to the short-term plan, liquid fuel based 12-24 months of implementable power stations will be established. However, government has initiated to implement a power station with a capacity of 920 MW.

Mid Term Plan (2012-2015)

Under this plan, government has taken into account to establish 3 to 5 years of implementable coil based power stations with a capacity of 2,600 MW to the total capacity of 7,714 MW.

Long Term Plan

As of the Power and Energy Development Roadmap (2010-2021), government expects to meet the desire destination (20,000 MW by the year 2021) through the increment of 10% production per year towards reaching the per capita consumption to 600 Kw.

Projected Surplus Electricity Production (Yearwise)

Source: Power and Energy Sector Development Roadmap (June 2010), Ministry of Finance

Projected Electricity Demand and Supply (Yearwise)

Source: Power and Energy Sector Development Roadmap (June 2010), Ministry of Finance

Bangladesh is steadily climbing up the development ladder. Energy and power needs to act as a key catalyst in helping Bangladesh in this endeavour. Industries are being automated and the country is gradually moving from a labor-intensive economy to a capital intensive one. Electricity and power are vital to the nation at such a stage. Bangladesh has a vast market as far as power and electricity is concerned and good prospects for constructing power generation plants exist in the country in terms of resources available and government policies.

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Source: Power and Energy Sector Development Roadmap (June 2010), Ministry of Finance