The World Bank (WB) has already rolled back funds it committed for a power plant and channelled the funds to post-flood rehabilitation programmes.

The Economic Relations Division (ERD) last month wrote a letter to the Local Consultative Group (LCG), a platform of the development partners in Bangladesh, inviting it to hold negotiations to thrash out the problems dogging the power sector.

Sources at the LCG said the donors are discussing the proposition and hinted at the donor agencies taking a hardline stance on the power sector oddities.

Chair of the LCG and WB Country Director Christine I Wallich on September 26 wrote to the prime minister about the donors' dissatisfaction with the power sector.

The government earlier told the donors that $3.6 billion in investment is needed in the sector for generation, transmission and distribution of power to meet the demand until 2007. The sector needs $1.6 billion funding for new power generation plants alone.

It had also told the donors that each year the demand increases by 450 megawatt (mw) and an additional 3000 mw is required to meet the rising demand until 2007. Besides, power generated at present is about 1000 mw short of requirement.

A government estimate puts at 30 percent the proportion of the population having access to electricity, but independent estimates put lesser figure.

The government expects about 30 percent of the $1.6 billion to be financed by independent power producers and the rest by joint ventures and the public sector, including donors.

Power generation in the last three years since the BNP-led coalition took office has, however, been abysmal. Only AES Meghnaghat Power Plant was commissioned with a generation capacity of 450 mw and that too under the private sector during the time.

Fifteen new power plants are under the process of procurement by the government and only four of them have been awarded, according to sources. Siddhirganj, Barapukuria, Baghabari and Tongi power plants are expected to feed the national grid 730 MW power by next year.

The fate of commissioning of the rest of the power plants hangs in the balance, donor sources said.

Wallich in the letter to the prime minister expressed frustration of the LCG with the power sector and observed that no significant generating capacity has been brought on stream in the last two years.

"You have often said that supply of reliable power is key to Bangladesh's continued economic progress. Businesses need electricity, investment and job creation depend on power being available: irrigation and rural enterprises need power; and public safety, schools and health facilities all need electricity to work," the letter reminded the premier.

According to the Power Development Board (PDB), on a specific day in October, 49 percent of the 2894 mw electricity produced and supplied went to the capital and the rest was split among other parts of the country that suffered acute power shortage.

The public and private power plants are currently capable of generating 4680 mw electricity and 2520 mw of it is supplied to the national grid from the plants set up between 1991 and 2002. From 1991 to 1995, 510 mw was added to the grid and 1200 mw from 1996 to 2001. In 2002, 450 mw was added to the grid, according to the PDB.

The WB channelled $80 million of the $116 million funds it had set aside for Sirajganj Power Plant under the $150-million Private Sector Infrastructure Development Project to post-flood reconstruction work.

The WB move came in an apparent reprisal for cancellation of awarding of job to Summit Group for installation of the Sirajganj plant by the Prime Minister's Office because of alleged links of some top executives of the group to main opposition Awami League.

Sources said the donors found the explanation of the government on the cancellation of the awarding of job unacceptable. They said that the donors are least bothered about political leanings of investors and that they only care about their competence.

The donors are also unhappy about the government's foot-dragging on adopting some of the prescribed power sector reforms by 2006 including a time-bound strategy to complete the sector unbundling and corporatisation, financing new generating plants, improving governance and accountability of the state-owned enterprises and preparing urban distribution companies for private sector participation.

Donor sources said the WB, Asian Development Bank (ADB) and other donors made a commitment to participate in the power projects, but they are now rethinking the decision.

They have been disheartened by the increasing political interference in the development of the power sector, lack of transparency and other questionable practices in generation capacity and procurement processes and insufficient progress on fulfilling existing commitments by the government on power sector reforms, an energy sector mission of the WB said last month.

Visiting ADB Vice-president Liqun Jin on Monday expressed displeasure at the mismanagement in the power sector at a meeting with the state minister for power.

The independent power producers are also now wary of investing further in the sector after the bitter experience they had had in the Sirajganj plant, sources said.

The ERD letter for negotiations to resolve the problems has not cut much ice with the donors, who would insist on the government's submitting progress report every six months, beginning January 15 next year, summarising actions taken to advance the government's three-year roadmap for power sector reforms, sources said.

The government would also have to meet with the LCG at least once a year, the first meeting to be held not later than March 31 next year, to brief them on the progress with implementing power sector institutional and policy reforms, among other things.

The LCG members are in discussion among themselves about whether to sit with the officials or the prime minister for the proposed negotiations.