Budget 2010-2011: Lights at the End of the Tunnel



Finance Minister of Bangladesh Mr AMA Muhith has just placed the National Budget Proposal to Parliament for the fiscal year 2010-11. This is the first time in the history of Bangladesh any budget is placed using power points in a digital format. Bangladesh is passing through desperate energy crisis. Confronting energy crisis is definitely among the priority objective of the government for the unhindered growth of targeted GDP. So as Energy Professional our interest is the allocation for Power and Energy.

We all know that confronting the prevailing and emerging power supply crisis is the major challenge of the present government. It is encouraging to note that Government has identified power sector as the top priority sector and reiterated government’s commitment to present load shedding free Bangladesh by 2012.The budget speech contained the following Demand supply forecast over the present tenure of the government. FM has also underlined government plan for LNG import, Open pit coal mining and has allotted Tk 6,115 Crore Taka for the 2010-11 fiscal year for power sector.

Although allocation for power sector is about 60% higher than previous year it is much lower than allocations for some other sectors. The speech stated to take expedited actions for coal policy approval and LNG import, enhancing exploration for petroleum at onshore and offshore, encourage renewable energy use, settle maritime boundary dispute of Bay of Bengal.

While experts have cautiously welcomed the budget proposal .many expressed apprehension that government may find it extremely difficult to implement its power sector mega plan. Import of LNG over short term may not be feasible. Experts agree in general with the vision of generating 9426 MW new generation by 2015. But they feel that given the poor track record of power project development over 39 years since independence turning around will not be easy. .Nothing has changed in policy or management level to expect smart project implementation in the remaining period up to 2015. Major Inventors are yet to consider Bangladesh as safe heaven for energy sector investment. There is serious crisis of primary fuel. It will be extremely difficult to arrange required fuel for such major increase in power generation over short time.

Finance minister in his speech presented an energy sector road map. It correctly identified huge untapped coal reserve. But he also mentioned about anxieties about appropriate mining for extracting maximum resources. He felt the requirement of appropriate safety and environment management plan. He should have mentioned why government in 17 months failed to do that. Our own coal is our major fuel option .If appropriately mined ensuring proper impacts management in about 5-7 years our energy portfolio may be completely changed. Government must rely on Resident and non resident Bangladeshi real experts rather than relying on non professional beauracrat and opportunists.. Only genuine mine planners and professional miners know how to deal with mines in different circumstances.

The FM document states that present gas crisis could be mitigated through importing LNG by the next two years and building two LNG terminals to handle import of 500 million cubic feet per day (MMCFD) capacity. The country’s on-going gas crisis is around 300 to 500 MMCFD.

The persons who advise government on importing LNG in two years must be telling fairy tales. Bangladesh will require huge investment to the tune of US1Billion to set up LNG import infrastructures. Then it has to pay about 10-12 US$ /MBTU LNG. Not only investment it will take at least 4-5 years to make all these happen. Even the detail feasibility study will take a year or so. LNG is not crude oil that it can be brought in normal oil tanker to Eastern refinery. Government can continue to pursue LNG import option. But accessing this in 2 years is impossible. The sooner government realise this better.
FM told the parliament of government vision to produce 9,426-megawatt power by 2015-which if accomplished would leave surplus power, instead of shortage.

He also stated that by 2012, enough power projects would be implemented to end the perennial load shedding that was impeding the investment environment in the country.

FM told about contingency actions to quickly make up the demand-supply gap. He said there was no option but to go for expensive diesel and furnace oil based rental power projects for short term. The government would have to subsidies the sector on one hand; increase the power tariff on the other.

However, the finance minister said that the price of power should be stabilized within 2014-15, when large coal-based cheaper power projects are expected to begin power generation–and thus reduce the overall cost. Acknowledging the prevailing energy crisis triggered by deficit in gas production, FM underlined the necessity for increasing gas production by investing in Bangladesh Petroleum Exploration Company, use of coal resources, import of LNG, saving power through demand management and power generation from renewable sources.

We agree with FM statement. But we feel enhancing gas exploration and development efforts and commencing extraction of coal by open pit method must be our priority actions. For these we need dynamic energy sector management of true professionals.

Realizing the necessity of the private sector in investing in the energy sector FM stated “It is to be noted that in future power supply under private sector initiative will significantly increase,” There must be effective private public partnership at all levels of energy value chain.

FM informed the parliament that, steps have been taken to minimize the gas crisis by 2013 when national companies would increase gas production by 265MMCFD, US company Chevron by 300 MMCFD and government would add another 500 MMCFD as imported LNG. By December this year, the national companies would increase gas production by 158 MMCFD.

Experts can not rely on 500MMCFD addition through LNG import. Evacuation of 300MMCFD addition by Chevron would remain a problem till transmission constraints are removed through setting up of compressor stations and construction of loop lines. Gas sector top management also needs to be overhauled with experienced professionals.Finance minister has rightly diagnosed the disease of energy sector and identified the medicine to cure. But we need the right surgeons to operate and right resources to obtain the medicine .Energy sector must be cured for the sake to national development.

138 Responses to “Budget 2010-2011: Lights at the End of the Tunnel”

  1. Author Image


    ” So as Energy Professional our interest is the allocation for Power and Energy.” – I think that’s where we are failing all ends up ! Every body is interested in the “allocation”, very little is done to improve project management skill !! Almost every project ends up in cost overruns and drags on for ages ! The result? Revised / Supplimentary allocations every year.

  2. Author Image

    Md. Lutfar Rahman

    It is a very nice article castigating governments budget 2010-2011 highly ambitious especially in power sector. LNG import will be suicidal for the economy. Government without considering technical feasibility just opted for LNG import. Your article has exposed all ins and out of demerits of LNG import to such a country where innumerable gas deposits are still untapped. First and foremost duty of the government to go for exploring untapped gas reserves to the great advantage of gas generation en route to power sector development. I express my solidarity to you in saying that advisers to government to import LNG should not be bureaucrat, rather they should be professionals.

  3. Author Image


    Dear Mr. Saleque,

    would like to contact you directly.


  4. Author Image


    I am invested in GCM. Given the gov.t’s incompetent track record with approving Phulbari no foreign investors will invest until GCM is approved to mine Phulbari and even then they will ask for massive incentives.

    The government needs to approve Phulbari and then issue project loans which is guarantees in USD to pay for the power stations which it can build with competent foreign companies managing the projects.

    When Bangladeshies wonder why they are so poor they dont have to look any further than the incompetent government to get their answer.

    I think they can build an LGN plant, but as the author said it will take years, so it is not a medium term solution only domestic coal and coal power plants are a medium term solution (3-8 years).

    I dont believe they would be able to get Barakapuria up and running as an open pit mine in less than 7 years as well. Therefore Phulbari is the only near term option for coal.

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