Bangladesh will strengthen its efforts to overcome one of its most pressing development challenges with a new project aimed at increasing coverage and improving the quality of the nations power supply.
Assistance in developing the required institutional foundations will come from 15,5 million US dollar just approved by the World Bank. Of that, 8,4 million dollar will be provided as a grant and the remainder as an interest-free loan.
Reliable, fairly-priced power supply, while taken for granted in many countries of the world, has not been the experience of most people in Bangladesh. Nearly 70 percent of the population has no access to electricity, while those with access face power cuts on a regular basis.
Besides affecting personal lives, erratic and poor quality of electricity supply was found by a recent assessment to be the dominant constraint to business development and growth in the South Asian country.
The World Bank financing will support a Power Sector Development Technical Assistance Project designed to address some of the fundamental weaknesses in the country’s power system.
– By focusing on improving the institutions that construct and operate the power system, rather than on the construction of physical assets themselves, the government is breaking down a major barrier to attracting the level of private investment needed to contribute significantly to economic growth and poverty reduction, said Salman Zaheer, World Bank Lead Energy Economist and task leader for the project.
– Technical assistance and capacity building of this sort can only be effective if they support good work in progress led by dedicated counterparts, and that is the case in Bangladesh’s power sector. We hope our assistance can speed the process and help people across the country—especially the poorest who are without access to electricity—to improve their lives, Zaheer added.
According to Zaheer, the government of Bangladesh has successfully encouraged private power development, adjusted prices to reflect cost of production, and supported the development of village electricity cooperatives, helping to increase rural access to electricity from five to six percent 10 years ago to over 20 percent today.
It has also set the stage for an independent economic regulator to depoliticize tariff-setting and advance the restructuring of the sector.
However, problems remain. Inefficiencies lead to high supply costs and power outages. Heavy reliance on public investment in the sector remains a significant drain on public resources and undermines the sectors operational independence, its customer orientation, and the pace of its development.
For the year ending June 30, 2002, net losses of the power sector amounted to about 136 million US dollar. In recent years, public investment in the sector has been about 300-400 million dollar annually — around 0,7 to 0,9 percent of GDP.
The new project will support the efforts of the Ministry of Power, Energy and Mineral Resources to put in place policies, industry structures and a gas supply strategy needed for balanced development of the power sector. It will help the Energy Regulatory Commission to effectively regulate the sector and it will prepare and secure financing for at least two power sector investment projects.
The total project cost is 20,5 million US dollar. Of this, the government of Bangladesh will provide 5 million dollar. The World Banks International Development Association will provide a 7,1 million dollar interest free loan, or credit, which has a 0,75 percent service charge, 40 years to maturity with a 10 year grace period. It will also provide 8,4 million dollar in grants.
Kilde: www.worldbank.org
