Power producers seek steps to recoup Tk7,000cr exchange rate losses

Independent power producers have urged the government to settle their fuel import bills at the prevailing exchange rate rather than the rate that was in place when they opened the letters of credit (LCs) for imports. They claim to have incurred losses of Tk 7,000 crore due to delayed payments by the Bangladesh Power Development Board.

The Bangladesh Independent Power Producers Association sent a letter to the prime minister on 12 October, requesting her to make this payment retro-effective from 1 July 2022.

Private power plants import furnace oil to generate electricity and are paid by the government at a later date. 

According to power producers, the delayed payments have caused them heavy losses due to the continued devaluation of the taka and appreciation of the dollar since March 2022.

Power Division officials said a draft law is being formulated to make true-up payments of foreign currency portion of fuel imports. The draft has been sent to various ministries for their opinion.

A "true-up payment" is a financial term used in various contexts, primarily in contracts, agreements, and financial transactions. It refers to a payment made to adjust or reconcile a difference between an estimated or provisional amount and the actual, final amount that is owed or should have been paid.

If this bill is passed, the Bangladesh Power Development Board will enter into separate agreements with the power companies. The government has decided to implement true-up payment from the day of the signing of the agreement, according to officials.

In the letter sent to the prime minister, Faisal Khan, president of the Bangladesh Independent Power Producers Association, said the date for the implementation of the true-up payment agreement remains uncertain, as the draft law is not yet final.

"We thus request your kind consideration to allow the true-up facility for monthly bills paid from 1 July 2022 onwards. This will enable the local power generation industry to survive the appreciation of US dollars and delayed payments by the Bangladesh Power Development Board and help us supply uninterrupted electricity to the nation," he said.

Faisal Khan also said that the exchange rate during the opening of LCs for fuel import in May 2022 was Tk86 per dollar but due to the delayed payment from the Bangladesh Power Development Board, the power companies had to procure dollars in December 2022 at Tk105, to settle the LCs. Yet the Power Development Board paid bills at Tk86 per dollar in December 2022 forcing the companies to bear the additional Tk19 per dollar to settle the critical fuel import LC.

"The depreciation of the taka against the dollar in and from March last year, along with the extreme delay in monthly bill payments and high-interest rates have bankrupted some of our member companies and have collectively caused over Tk7,000 crore in losses," Faisal Khan added.

According to the current power purchase agreement (PPA), furnace oil-based independent power plants import furnace oil as per demand and submit the invoice to the Power Development Board within seven days. The Board then pays the bill within 30 working days.

Under the rules, after the bills are submitted by the power producers, the Power Board sends the bills to the Power Division for verification. After scrutiny, the Power Division sends the bills to the Finance Ministry to release the subsidy money and the entire process takes about two months. 

However, since FY22, the government has been taking more time to pay these bills due to the financial crisis. Currently, the government is almost five months behind in payment of dues.