Vol. 5 Num 208 Thu. December 23, 2004  
Front Page

RPCL's high-cost project to overcharge consumers

The Rural Power Company Limited (RPCL) is secretly going ahead with an unsolicited 280 MW power project in Savar at a high cost of Tk 1,000 crore violating the private sector power policy and ignoring specific directives from the Prime Minister's Office.

So far the authorities have not challenged the deal that aims at over-charging rural electricity consumers and unduly benefiting a certain business lobby, competent sources say.

The RPCL signed a contract for engineering, procurement and construction (EPC) of the controversial Dhaka North Power Project (DNPP) with Swiss company Alsthom on October 7 this year. Unlike other power projects, this single cycle power project gives Alsthom an additional Tk 80 crore for supplying necessary spares.

The 450 MW combined cycle power plant at Meghnaghat was set up spending less than 200 million dollars (equivalent to Tk 1,200 crore at present exchange rate) with a power tariff of 2.79 cents (Tk 1.8) per unit for 20 years.

But the RPCL asks for Tk 2.2 per unit for DNPP power. Again, it suggests a 4.5 percent annual increase in tariff in tandem with currency fluctuation and consumer price index. Payments will be made in euro. As of today, the RPCL did not seek government clearance for it.

"As a private body owned by the Rural Electrification Board (which the government owns), the RPCL does not need permission to set up a power plant," claims a top RPCL official unwilling to be named.

"The Executive Committee of the National Economic Council (Ecnec) has earlier told us in general that we don't need such approval," the official notes.

A top official of the power ministry expressed similar views saying: "We have the REB to represent the government. The REB is supposed to protect the public interest."

But the Power Cell, the Power Development Board (PDB) and the Prime Minister's Office (PMO) contradict the RPCL views. Even other sources in the RPCL admit that the DNPP scheme is violating all norms and rules and pushing ahead a raw deal that will hurt rural consumers, benefit a business lobby and set a bad precedent.

"Any power project needs government approval. If it is private, it has to comply with the government's private power policy. The DNPP does not comply with any policy," says an official of the Power Cell on condition of anonymity.

"A power plant deals with a basic public service and the government is responsible for such infrastructure. It also needs gas supply and transmission line and co-ordination with other agencies. So nobody can unilaterally set up a plant," he adds.

"Public interest is also very much involved here. The government must also know that the DNPP is not hurting public interest by making rural clients pay undue and high charges," he notes.

Furthermore, the PMO in two separate letters directed the power ministry to implement the DNPP under the Private Sector Power Generation Policy.

In its letter on April 24, 2003, the PMO said the RPC implemented its power project in Shambhuganj in Mymensingh following Ecnec approval on November 23, 1994. It will be wise to similarly implement the proposed DNPP through Ecnec's approval.

The PMO in its May 14, 2003 letter referred to Prime Minister Khaleda Zia's directives to follow the Private Sector Power Generation Policy and fix a competitive power tariff lower than the current rate.

PDB sources said even very small private power units of 10 MW need government permission.

Meanwhile, a court injunction has stopped an audit by the project's German financier KfW. The audit was supposed to start in late November for 10 days and the Economic Relations Division (ERD) had extended full co-operation. But the RPCL had done everything to stop this process until the High Court issued the injunction.

The RPCL floated the EPC tender for this project back in January but restricted participation of EPC contractors. The project's German consultant Lahmayer, which was appointed at a high price without any competitive bid, set this term apparently to award the contract to a particular company.

Only two companies participated in the bid --Siemens of Germany and Alsthom. But Siemens withdrew its bid after allegation of corruption had come up and the German government in a preliminary review found irregularities.

While Germany continued probing into the RPCL books, RPCL at one point announced that KfW can only see the books that involves its funding. Then finally it announced that it would not use German fund for the project.

When the German audit became inevitable, a court injunction on November 21 stopped it. The injunction stays the activities that could stop the progress of the DNPP implementation following a petition by an industrialist named M Haidaruzzaman.

The court says that Haida-ruzzaman purchased lands to set up an industry in Savar on the basis of his discussion with RPCL and that the DNPP will provide him with power.

But following the government decision that RPCL will co-operate with KfW for an independent review, RPCL in a letter on October 3 informed him that the company could no longer assure him of anything.

The court adds that this RPCL letter has made Haidaruzzaman sick. The RPCL then told the court during the hearing of the petition that it has suspended DNPP's work because of the government letter on the KfW review.

The court says the government order to suspend DNPP's work should be withheld till it is finally resolved so that Haidaruzzaman is not harmed.

RPCL's legal adviser Sigma Huda interpreted the court order saying, "RPCL should not at this stage permit any undertaking of an Independent Review by KfW or its review team. Any such step by RPCL will make it liable to face contempt proceedings."

The Konabari area of Savar where Haidaruzzaman bought a land to set up industry, already has electricity supply and a large number of industrial units.

When asked, a senior REB official said the RPCL is "taking preparation" to deal with the court injunction. The RPCL acting managing director was not available for comments.

A state minister commented to The Daily Star recently, "Do not to write about these petty irregularities in the interest of the nation." He added, The Daily Star's past reports of corruption in this project had "done a lot of damage to the country."

The government a few months back cancelled the Sirajganj 450 MW project of the Summit Group after its finance was finalised. That project outlined a low-cost package in line with the Meghnaghat project and all donors opposed the cancellation.

The official reason was that Summit was picked on the basis of a single bid. But sources said it was cancelled because an Awami League lawmaker is the brother of the Summit's chief.

Donors led by the World Bank expressed concern at the opaque dealings in the RPCL. The Asian Development Bank that gave birth to RPCL last year objected to the unsolicited appointment of Lahmayer as the DNPP's consultant and brought charges of widespread irregularities.