Govt to revisit IPP tariffs amid pricing concerns

The interim government is set to form a committee to review the tariffs of independent power producers (IPPs), Power, Energy, and Mineral Resources Adviser Muhammad Fouzul Kabir Khan told The Business Standard today.

The decision to revisit the government's power purchase prices from the IPPs followed a meeting with the Bangladesh Independent Power Producers' Association (BIPPA) at his office in the capital.

BIPPA President David Hasanat said after the meeting that the generalised claim that IPPs enjoy an "extortion tariff" is threatening Bangladesh's energy security, economic stability, and investment potential.

"In response, we requested the government to analyse which plants' electricity selling prices are fair and which are not," he told TBS.

"You will find very few contracts allowing an unjustifiably high price. The rest of the power producers are at risk," Hasanat added.

He stressed that private sector investors need a clear distinction between fair and unfair practices. Labelling everything as grey is dangerous, as many fair players become victims of generalised blaming.

The meeting, which also included Bangladesh Investment Development Authority Executive Chairman Chowdhury Ashik Mahmud Bin Harun, secretaries for power and energy and mineral resources divisions, and the Bangladesh Power Development Board chairman, discussed the financial difficulties faced by IPPs.

BIPPA urged the government to clear overdue receivables amounting to Tk12,000 crore, with an emphasis on immediate payment of around Tk5,000 crore to heavy fuel oil-based (HFO) plants.

These plants are unable to open letters of credit (LCs) for fuel imports, which could lead to a power outage of over 2,500MW in March when demand is expected to surge.

"We are trying to arrange funds to pay the IPPs," Adviser Muhammad Fouzul Kabir Khan told TBS after the meeting.

IPP companies have incurred Tk5,500 crore in foreign exchange losses as they were importing fuel with dollars purchased at market rates – much higher than the official rate – over the past two and a half years.

Delayed payments from the PDB forced companies to borrow additional working capital from banks, resulting in an extra Tk3,200 crore in interest, BIPPA said.

Along with their call for urgent government intervention, the association requested that the government uphold power purchase contracts to rebuild trust among investors and lenders.