Who Turned Out The Lights? The Politics and Economics of Power in Bangladesh

BY

Photo by (c) G.D.abir

Chronic power shortages are a daily feature of life in Bangladesh. The country desperately requires economic planning that is not politically held to ransom to the economic whims of foreign countries.

Bangladesh has been suffering an ever worsening balance of payment deficit, and has over the last few years become increasingly dependent on foreign economies for the provision of resources. Just in the last few years, it has taken foreign loans from IMF, Russia and India, each around the $1bn mark.

The conditionalities of each of these loans is telling as to their politics and purpose. The IMF Extended Credit Facility agreed in Spring 2012 is linked to implementation of agreeable economic management improvement and the expansion of VAT, while the Indian loan of Summer 2010, ostensibly for surface transport and interconnectivity demands that the lion’s share of contracts, goods and services be sought from India. Particularly troubling, in view of the current government’s suppression of its opposition,  is the Russian agreement signed just this January, which officially extended a $1 billion line of credit for military supplies, an additional $½ billion for a nuclear plant and opened the gas sector to Gazprom.

One path to reducing this deficit is to attract foreign investment, but according to a recent ‘Doing Business’ survey, Bangladesh ranks as one of the worst places in the world for investors to go into, scoring most lowly out of 185 economies on ‘Getting Electricity’. Parts of Dhaka can go for 10-12 hours without electricity, and the situation is much worse outside the cities.  It has been estimated that power shortages and inefficient distribution costs the economy $1bn a year and GDP growth by between 0.5 and 1.7%.

Despite being at the centre of its 2008 election manifesto, it should be surprising that the government displays a shocking ineptitude when dealing with this immobilising energy crisis. Last year Bangladesh allowed the eastern Indian state of Tripura to use the Ashuganj river passage to move gas extraction equipment, due to Tripura’s poor transport links to the national grid in Indian Assam. In return for this favour, and perhaps as recompense for the environmental damage caused to the river banks by moving the heavy installations, Bangladesh was promised 100MW of electricity from the project, which has since never materialised. Tripura has referred the administration of this power transfer to the centre in New Delhi, but to date no extra electricity has been supplied. For a project so integral to the economy of Tripura, there would have been some sort of legally binding agreement, but the conditions of the deal suffer from a lack of transparency.

Since this government took the reigns, there has been a spurt in private short-term power plant rentals from India, which have further worsened the balance of payments deficit. Under this arrangement Bangladesh pays above-market prices to buy electricity from foreign suppliers, whilst promising consumers they could benefit from reductions in energy prices. What followed was a sham whereby the private rental plants were consistently costing the national exchequer, but failing to provide the contracted electricity to the national grid. There are oral reports about plants in some instances producing only 5% of the contracted electricity.

The incumbent party are quick to stress their ability to find quick energy sources, but it is extremely concerning how the provision of a resource of such national pace-determining significance is not audited. Of course for private companies to be able to do this, one would assume there are power holders vying for a ‘cut’ for facilitating the government authorisations. This is hard to ascertain, as no details were released of the tendering process itself.

What Bangladesh desperately needs is economic planning with foresight, where the people are made the focus of benefits realisation, and a planning mechanism that is not held politically ransom to the economic whim of foreign countries. The first step in this process is increased accountability, as it demonstrates to a nation that their political leaders’ can be scrutinised, and hence automatically leads to more efficient resource allocation. The on-going saga with respect to World Bank financing of the Padma Multipurpose Bridge Project, shows how corruption and a lack of transparency can impact the government’s credibility and ability to deliver strategic national infrastructure.

Electricity was a critical pillar of the Awami League manifesto, it pledged to increase production from 4,000 to 7,000 MW in three years.Failure to keep to manifestos is nothing new, but compromising environmental and economic stability can have serious consequences, on security. Assuming that the policy to have completed the Roopor nuclear power plant with Russian support by 2015 is a success, no government official has yet commented on how nuclear waste would be disposed.

Ultimately, poor energy provision has major cascading impacts on the GDP and welfare of a nation. The majority of the population of Bangladesh suffer power shortages, after all they are lower down in the pecking order from industries and wealthier neighbourhoods. But if the state continues to take short-term energy provision options, there is a danger that even foreign investment will slow, further exposing Bangladesh’s under-evolved revenue collection system.

Source: The Khichuri