From 2001 to 2006, the BNP-Jamaat coalition government period was marked by extensive load shedding, leaving the nation in darkness. Many people still remember the frequent load shedding throughout the day, studying by candlelight, or playing in the streets during the hot evenings due to the constant power outages. Load shedding was so severe that in 2003, the then MP of Dhaka-5, Salauddin Ahmed, had to flee from Shonir Akhra to Jatrabari to escape the wrath of angry citizens. Additionally, in Kansat, Chapainawabganj, a large-scale protest and movement took place over demands for electricity, where 20 innocent villagers were killed by police gunfire. In response, the caretaker government first approved the quick rental of power plants to quickly solve the electricity problem. However, after the Awami League came to power, there was a rush to approve quick rental power plants, for which over 104,000 crore BDT was paid in capacity charges over the last 15 years. This amount could have funded the construction of three Padma Bridges or an equivalent metro rail project. In fact, with this money, nearly four thermal power plants, similar to the under-construction Payra 1320 MW plant with a budget of 28,000 crore BDT, could have been built, producing over 5200 MW of electricity at a lower cost. In today’s video, we’ll tell you how Quick Rental Power Plants became a scheme to make money like the genie’s magic lamp.
Overview
When the caretaker government took power on January 11 (1/11), they began considering the idea of establishing quick rental power plants to quickly address the electricity shortage. Although the project took some time to start due to its high cost, the government approved 13 rental and quick rental power plants at that time. These plants were considered a quick solution to the country’s power crisis, and by 2008-09, the power generation capacity of the BNP-Jamaat period, which was 4005 MW, had exceeded 5700 MW. Quick rental power plants are essentially temporary and modular plants that can be quickly set up and relocated to other areas to meet power demand. These plants typically run on diesel, gas, or other fuels and are generally seen as temporary solutions. They supply electricity according to demand and remain idle when demand is low. However, under contracts, they are required to be ready to generate electricity at any moment, and the government pays these plants a capacity charge for this readiness.
The project gained further momentum after the Awami League came to power following the 2009 elections. The party promised to resolve the power and energy crisis in its election manifesto. As part of its plan, the government focused on rental power plants to quickly overcome the electricity shortage and approved 20 more plants. As a result, in just three years (2011-12), an additional 3000 MW of power was added to the country’s total capacity, bringing it to over 8800 MW. However, due to increased economic activity, growing demand from businesses and industries, and higher consumer purchasing power leading to increased use of electronic devices, the demand for electricity continued to rise. To meet this growing demand, the government kept approving more quick rental power plants with private sector investment. During the 15-year tenure of the Awami League government, from 2009 to 2024, over 30 quick rental power plants were approved. With investments in both government and private sectors, as well as foreign investments, the total power generation capacity of the country has reached 26,500 MW by 2024. Yet, despite this huge capacity, the country still faces load shedding in various regions, and electricity prices have increased multiple times.
Despite high electricity prices, the government has had to provide subsidies amounting to 17,000 crore BDT over the past four years to cover the high cost of electricity purchased from these plants. This amount alone could have covered half the cost of the Padma Bridge. To manage these high prices, electricity tariffs were raised 11 times in the retail and wholesale markets over the past five years. In response to a question in parliament in September 2023, the State Minister for Power, Energy, and Mineral Resources, Nasrul Hamid, revealed that from the 2008-09 fiscal year to the 2022-23 fiscal year, a total of 105,000 crore BDT was paid in capacity charges over 15 years. Of this, 43,333.83 crore BDT was paid over the first 10 years (from 2008-09 to 2017-18), while a staggering 63,452.67 crore BDT was paid in the last five years (2018-19 to 2022-23). There are allegations that a large portion of this money went into the pockets of those close to the government, burdening the public with immense costs. In today’s video, we’ll show you how massive corruption unfolded in Bangladesh’s power sector under the guise of quick rentals.
Making Money Out of Thin Air
After coming to power in 2009, the Awami League government quickly enacted the “Speedy Supply of Power and Energy (Special Provisions) Act, 2010” to increase electricity production. This law granted the government and all state-controlled entities absolute authority to take any measures related to the rapid production, transmission, transportation, and distribution of power and energy. It allowed the government to bypass accountability, giving way to rampant corruption. Taking advantage of this law, influential political figures and their close associates exploited the system, setting up power plants and reaping enormous financial benefits.
The primary way corruption occurred through the quick rental power plants was via “capacity charges.” Even if no electricity was produced or used from these private power plants, the government was obligated to pay them as per the contract, and this payment was known as the capacity charge. For example, a company might be contracted to supply 80% of its capacity on demand. If only 40 MW of electricity was used out of an 80 MW capacity, the company would still be paid for the remaining 40 MW, as it needed to remain ready to supply power. This system exists in several countries, including the US, France, the UK, Australia, and the European Union. However, the corruption in Bangladesh occurred mainly because the government approved far more power plants than necessary.
The lack of accountability in the special provisions law allowed politically connected businessmen to set up quick rental power plants without any bidding competition. Some of the most significant beneficiaries included Summit Group, S Alam Group, United Group, Confidence Group, Orion Group, Sikder Group, Regent, Unique Group, Baraka, and many more. Among them, Summit Group, which is closely tied to the government, received the most contracts. According to reports, over the past 15 years, Summit Power alone received 10,623 crore BDT in capacity charges, accounting for 12% of the total. Other companies that benefited include UK-based Aggreko International (7,932 crore BDT), Malaysia-based Chinese company Erda Power Holdings (7,523 crore BDT), United Group (6,575 crore BDT), Bangla Cat (5,067 crore BDT), Orion Group (4,525 crore BDT), and Doreen Group (2,183 crore BDT). Among them, Doreen Power’s owner is Tahjib Alam Siddiqui, the son of the late Nur-e-Alam Siddiqui, a former leader of Bangladesh Chhatra League and two-time elected MP from Jhenidah on the Awami League ticket.
Furthermore, between 2013 and 2022, Bangladesh paid nearly 11,015 crore BDT in capacity charges for importing electricity from India. The capacity charge for imports was 501 crore BDT in the 2013-14 fiscal year and increased to 1,724 crore BDT in the 2021-22 fiscal year. The special provisions law shielded these contracts from scrutiny, allowing for such large payments even when no electricity was imported. The government extended the law’s validity several times, most recently until 2026.
Bangladesh’s current electricity generation capacity is 26,844 MW. However, regular consumption is only around 13,500 MW, reaching 16,500 MW during peak demand in hotter weather. This means that around 10,000 MW of capacity remains unused most of the time. Global experts suggest that having 20% more capacity than demand is ideal, but Bangladesh currently has over 60% excess capacity. Most of the power plants operate at only 25-30% capacity, remaining idle for 70-75% of the year, yet the government continues paying for their capacity charges.
In 2012, Barrister Andaleeve Rahman Partho, Chairman of the Bangladesh National Party (BJP), accused the government of importing obsolete machinery under the guise of quick rental power plants, allowing influential businessmen to loot public money while the plants sat idle.
These capacity charges are also tied to the dollar exchange rate, as fuel for electricity production is imported using foreign reserves. Consequently, these charges are paid in dollars, creating opportunities for money laundering under the guise of capacity charges. According to the Center for Policy Dialogue (CPD), as of November 2023, there was a backlog of 70,000-80,000 crore BDT in capacity charge payments. Since these payments are made in dollars, it’s believed that the quick rental of power plants may have contributed to the depletion of the country’s foreign reserves.
In short, these power plants were established under the pretext of meeting urgent electricity needs, yet they became a massive financial burden on the country. The capacity charge system, along with political influence and corruption, allowed these companies to exploit the system and amass billions in profits. Could this be one of the key reasons behind the country’s economic struggles today? What do you think?
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