Bangladesh interim government makes sweeping energy sector changes
Major changes made by Bangladesh’s new interim government have put at risk several multi-billion dollar energy deals and projects that were in the pipeline.
Bangladesh’s new interim government has suspended special laws used by the previous government to accelerate deals and projects in the power and energy sectors by passing competitive tenders, and regulate natural gas and power tariffs avoiding stakeholders’ opinion, in sweeping changes to the country’s energy policies.
The interim government led by Nobel laureate professor Dr Muhammad Yunus was sworn in on August 8th, after weeks of student-public mobilisation that led to political turmoil leaving several hundreds dead and finally toppling the previous authoritarian regime on August 5th.
The country’s interim government has also decided to scrutinise previous transactions under the law and is also considering scrapping the regulation itself.
Bangladesh’s interim government has suspended all ongoing negotiations, selections, and purchasing of all power and energy projects under the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010 (Amended 2021), the press information officer of the Ministry of Power, Energy and Mineral Resources (MPEMR), Mohammad Shafiullah said on August 19th in a statement.
Shafiullah however said that activities under deals that have already been concluded under the special law will be allowed to continue.
He issued the statement following a weekend meeting of the newly appointed interim government’s adviser for power and energy, road transport and bridges Muhammad Fouzul Kabir Khan with top officials of the energy and mineral resources division and power division under the MPEMR.
All previous activities under the Act will be reviewed by the interim government and the advisory council will decide whether it will be abolished or not, Kabir Khan told reporters after the meeting.
The announcement has put several multi-billion dollar power and energy deals and projects that were in the pipeline at risk, including proposed fossil fuel and renewable energy-based power plants, LNG import terminals, long-term LNG contracts, petroleum product import contracts, and spot LNG purchase modalities.
Among the major projects that were close to inking deals under the special law are a 600 MMcf/d capacity floating, storage, re-gasification unit (FSRU) along with necessary subsea pipelines near Payra sea port in southern Bangladesh, which were to be built by U.S.-based Excelerate Energy, and a couple of dozen renewable energy-based power plants, especially solar and wind-based ones.
The import of re-gasified LNG from India through the pipeline would also be uncertain with the latest policy change.
Extending the tenure of around half a dozen high sulphur fuel oil (HSFO) based power plants was also blocked with the new policy of the interim government.
The interim government also intends to review the contract terms of some 100 power plants, two FSRUs, and six long-term LNG import deals that were inked over the past 14 years under the special law.
The Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010 was first enacted in October 2010 and gave the Bangladesh government sweeping powers to bypass existing legislation in the energy and power sectors and implement projects quickly, on the rationale that red tape and bureaucracy were holding up vital development of energy resources.
The tenure of the special provision enacted in 2010 was extended on several occasions, most recently until 2026 with the latest five-year extension made in 2021.
Under the law, eight dozen power and energy projects of all types, including power generation plants, infrastructure to import natural gas, coal, LNG and petroleum products, as well as the extraction of mineral resources have already been implemented and several dozen are in the pipeline, a senior official of the MPEMR said.
Electricity generation, transmission and distribution projects were also covered under the Act.
The legislation states that any activity which comes under its purview, or any official or employee implementing such activities cannot be subject to any legal challenge, the official said. The law also allows parties interested in power and energy projects to enter into contracts through negotiations with a “special committee,” said the official.
During the recent meeting, the MPEMR also decided to put on hold a law that allowed the government to adjust power and natural gas tariffs through executive orders, bypassing the Bangladesh Energy Regulatory Commission, or BERC, the MPEMR statement said.
The previous government had amended the BERC Act and taken over the right to adjusting gas and power tariffs arbitrarily, bypassing public hearings and the regulator BERC.
Suspending the legislation means the interim government will restore the responsibility of regulating energy prices back to BERC, which will decide future power and natural gas tariff adjustments following public hearings.
The Bangladesh government had raised both power and natural-gas tariffs several times by executive orders under the amended BERC law.
IMF bailout
Raising energy prices and the removal of subsidies were some of the conditions under which Bangladesh was granted a $4.7 billion bailout by the International Monetary Fund to meet its energy expenses and restore the financial viability of its state energy companies.
The protesters who ousted Prime Minister Sheikh Hasina had levelled accusations of autocratic rule that bypassed legal frameworks and caused widespread corruption, including the suspended energy legislation that allegedly awarded projects that state energy firms could not afford, resulting in ballooning losses and the draining of government finances.
Local energy industry experts and watchdogs have long been expressing concern over the special legislation, saying it provoked corruption and non-transparency in the energy and power sectors.
“I think the country’s existing power and energy situation does not permit continuation of the Act,” said Professor M. Tamim, who was special assistant to the country’s chief adviser during the previous 2007-2008 caretaker government and looked into energy issues.
He said that the law, enacted in 2010, was initially necessary to improve the country’s persistent energy crisis urgently. “Currently the country has stable power and energy supplies, compared to the past,” he said.
Professor M Shamsul Alam, an energy adviser of the Consumers Association of Bangladesh, a rights group, said, “The special law has long been protecting the interests of the evils as transparency and accountability are being neglected here. It has been playing as the major cause for inflating costs in power and energy sector.”
“We can’t go to court to challenge any kind of irregularity or corruption in the government’s procurement process under the law,” he lamented.