State Minister for Power Anwarul Kabir Talukder told The Daily Star last week that finding soft loans for power projects has become extremely difficult for Bangladesh in the recent years, but at the same time, the country cannot afford to take conditional loans, which are designed to drain out a huge sum of money without delivering actual products.

"We don't want conditional loans which do not serve our purpose. We want a loan that we can use for new power schemes or for rehabilitation schemes that we really need," the state minister said.

The Czech government offered 22 million dollars in conditional soft loan for rehabilitation of two old Czech power plants the Khulna 60 mw and 110 mw plants built in 1973 and 1984 respectively by a Czech government company, Skodaexport. These plants are now generating maximum of 50 mw and 85 mw respectively. The condition for the loan demands that only Skodaexport will undertake the rehabilitation project from next year.

The Italian government on the other hand offered 18 million dollars or Tk 123 crore for a Tk 170 crore rehabilitation of the 50 mw third unit of Kaptai hydro-power plant. This unit uses a US made turbine and a generator. While Power Development Board (PDB) feels that this plant does not need rehabilitation before 2016, the Italian loan has to be taken within this year.

About both these loans, the state minister expressed his reservations. The Czech loan contradicts the government's open tender policy plus the ministry feels that although these plants are under-performing now, they do not need massive overhauling.

"Both the Czech plants are old. But we spent a lot of money for their overhauling and rehabilitation in the past. It's a rule of thumb for any power plant that in its lifetime, the overhauling cost of the plant should not exceed 20 percent of the original installation cost. When a plant has been overhauled five times, it should go into retirement," the state minister said.

Both the Khulna units have recently undergone overhauling. The repair job for the Khulna 110 mw plant has been completed only recently while the repair works for the 60 mw plant is still in progress. "Therefore, there is no reason to spend 22 million dollars of conditional loan for these plants," he added.

Regarding the Italian loan, the state minister noted that before initiating a power rehabilitation project, there should be a survey or a study to identify the problems of the plant. "But there has been no study on the unit 3 of the Kaptai plant," he said.

The Kaptai units 1 and 2, built with Italian generators and American turbines, are currently being overhauled for the first time. Both of them are 34 years old and have run for 8400 mega-kilowatt hours. "In that light, the unit 3 should undergo its overhaul in 2016," he said adding, "There is no reason to rush for the Italian loan."

The process related to the Czech loan is now at an advanced stage. However, for the last two months, the power ministry has stopped going forward with the loan considering the above mentioned issues.

Following negotiations that began last year, Economic Relations Division (ERD) on March 27 signed a memorandum of understanding with the Czech government for this loan at a minimal 0.5 percent interest rate with 30 year repayment period and 15 years of grace period.

Skodaexport representatives in Dhaka argued that the two Khulna plants are presently under-performing because the government in the past involved different suppliers for supplying some vital parts. They said the Czech government's loan offer was not meant for draining out money.

They also said in 1997 rehabilitation of Khulna 60MW was carried out by a Chinese firm named GIETC and NEIE Consortium, which delivered a new boiler and a control system. Skodaexport once again repaired the plant in last March. Since then, the plant tripped six to seven times due to failures of grid, I.D fan, boiler super heater tubes, and condenser tubes, which had not been parts of the repair works.

Skodaexport also undertook a major overhauling of Khulna 110MW unit in 2002. In the last 4-5 months there has been frequent failure of boiler front wall bend tubes and superheater tubes, which were not manufactured by Skodaexport.