The most realistic way to solve the electrical power crises in Bangladesh is to allow free market economy to come into play in the power sector and to fully privatize power generation, distribution and supply. Private telecommunication and mobile phone business in Bangladesh has proved to be a grand success. Similar success can happen in the business of electricity supply by private electric companies in Bangladesh.

The present size of the electricity market in Bangladesh is about 5.5 million dollars a day or about 2 Billion dollars a year and the demands for electricity in Bangladesh are rising by 6% per year. Continuous uninterrupted electricity supply is essential for the progress of the country but the government’s monopoly on electricity supply to consumers is having very bad effects on the economy of Bangladesh. For the past several decades, the government has been unsuccessful in ensuring reliably supply of electricity in the country and admits that there is a shortfall of 40% in electricity generation capacity compared to the demand.

Each day, over 900 events of electric power supply interruptions occurs across Bangladesh due to low electricity generation capacity, load shedding, faults in the depilated condition of the supply network and the geriatric condition of power stations and substations. Power outages cause million of dollars worth of economic loss daily, as businesses slows down and production at the factory stops during power outages. This results in reduced gross national product (GNP), less income, helplessness and continued poverty.

An example is that hourly paid factory workers do not get paid for the period of time of electricity failure when production halts. The consequence of electricity failure is lower take-home-pay for the individual factory workers for no fault of their own. Such situations cause frustration and at times violence among workers. In great desperation and anger, sometimes the factory workers surround and threaten to destroy the substations and other electrical assets of the government. This is one of several thousand pathetic stories related to socio-economic ill effects of electrical power interruptions in Bangladesh.

The electric power interruption problem is not unique to Bangladesh. Historically, all state owned and state managed electrical power generation and distribution systems exhibit poor electric supply reliability in Asia, Africa, and South America and Eastern European countries. Recently, even former Soviet bloc countries have privatized its power sector. Developing nations are realizing rather late that only private electric companies are successful in continuously delivering electricity to consumers in a reliably uninterrupted manner.

Nontraditional approach to solution: The acute electrical power crises in Bangladesh cannot be solved superficially, or in a classical way. Innovative thinking and solutions derived from non-traditional way of thinking is required to find realistic permanent solution.

First step towards real solution: The first step towards a real solution is for the people, politicians and the government of Bangladesh to accept the historical reality that government or semi-government bodies are NOT the right organizations that can successfully develop electric power generation and deliver electricity reliably to consumers. Only the private sector can.

Second step, ten year master plan for privatization: The Government of Bangladesh and the Power Development Board (PDB) must immediately develop a 10-year Master Plan for step-by-step privatization of the entire power sector in order to get out of the business of generating and selling electricity to the people of Bangladesh. Power sector privatization will stimulate the economy of Bangladesh and cause growth of local electrical industries in Bangladesh.

If each step of the privatization plan consists of approximately 10 percent privatization per year, then by 2020, all power stations, sub-stations, transmission, distribution, supply to consumers and billing would be in the hands of the private companies in Bangladesh. Private companies with capital to invest in new power stations and with funds to modernize the electrical network can be qualified to take ownership of part of the power sector. However, prior to the year 2020, the private electrical companies of Bangladesh can continue to invest in the yearly privatized portion of the network and can begin to install new power stations and do network modernization necessary to ensure reliable delivery of electricity to consumers.

In the 10 year power sector privatization plan, the government must give financial incentives (e.g. similar to tax exemptions) to encourage foreign, local investors and venture capitalists to take ownership of the power sector in Bangladesh and to invest in this area to make a reasonable profit. Greater incentives could be given for wind power, sea shore power, solar power, hydroelectric and nuclear energy.

The benefits of electrical power sector privatization in Bangladesh can be more intense than the good that came out from allowing private companies to offer telecommunication and mobile phone services in Bangladesh. Privatization will lay the seeds for local technical innovation, enhancement of local technical expertise and promote growth of private electrical industries in Bangladesh. With the power sector privatized, the demand for new power system equipment, such as circuit breakers, pre-paid electrical meters, cables, switches, electrical poles will suddenly increase as the various private electric supply company undertakes new electrical power system modernization projects. Many private electrical devices and electric subsystem manufacturing industries in Bangladesh will emerge. This will create new employment opportunities in the skilled and unskilled labor market. Local Bangladeshi Engineers may invent and bring patentable innovations in electric power systems. Such stimulation to economy cannot occur in government owned power sector because it is very difficult to sell products and technology to the government.

Third Step, execute parliamentary actions: Politicians and law makers must join together to formulate a new bill to enact new laws required for privatization of the power sector in Bangladesh to legally transfer, lease or sell the government electrical power generation and electricity distribution assets to the private companies in Bangladesh. The new privatization law will give confidence to potential private local and overseas investors who may be interested in power generation and electricity supply business in Bangladesh.

The new law should also protect the private local and foreign investors in the power sector. Laws are also required to give 24-hours legal access to public lands and structures where electrical poles, pylons, power stations, substations etc are located.

Presently, the government is already allowing Independent Power Producer (IPP) to operate in Bangladesh under government control. This may prove to be ineffective in solving the power crises in Bangladesh and IPP may lose money in the long run. Only 100 percent (not partial) privatization of the power sector can guarantee success, as it will attract big and small local and foreign investors, mutual fund managers and venture capitalist from around the globe in this modern global world’s economy called ‘globalization’. Any partial or ‘half-hearted privatization’ will be doomed for failure, as investors will shy away from possible government interventions, delays and conflicts. In business, partnership with the government of third world countries is often perceived as risk to investment by local and foreign investors. This is a reality.

Fourth step, electric network segmentation: For the private Bangladeshi electric companies to become successful, the present electric power distribution network needs to be electrically divided and segmented, with clear line of demarcation between network segments. Each segmented network can be sold off or leased to a different private Bangladeshi electric company to prevent monopoly. Competition in business is good for the economy of the country. However, each private electric company may buy and sell electricity legally from each other across the network segments, as the demand for electricity fluctuates during the day, night, week, month or the seasons in each segment.

Without the electric network segmentation, the risks to private company investment would become too high and privatization will prove to be a failure. Sharing a network between two or more electric companies or with the government can be a source of conflicts between companies. The technical advantage of network segmentation is that electrical network faults or overload conditions in other parts of the network can be prevented to escalate and disturb the network under the jurisdiction of a private electric company. End-to-end ownership i.e. ownership right from the source electric generator, all the way down to the consumer’s electric meter will increase investor’s confidence level. Such complete ownership, will give full physical and technical access to the private company to quickly fix any electrical problems without depending on other parties or other companies to fix the problem first.

Fifth Step, install many small powers stations: One nontraditional and non-classical way of thinking to find innovative solution is to install many small power stations, rather than building only a few very large ones that the Bangladesh Power Development Board (PDB) is presently thinking of. The Bangladesh PDB has a classical way of thinking in this area of technology that is not the optimum solution in the demographics of Bangladesh. The better approach to increasing the power generation capacity and electricity supply reliability in future is to take “don’t put all your eggs in one basket” approach and build many small combined cycle powers station rather than build only a few large ones. This is known as ‘distributed power generation”. Distributed generation is very suitable for gas fired power stations and is applicable in the demographics of Bangladesh where 80% electric power generation is from natural gas.

Also, small MW natural gas powered stations are affordable, simple, and easy to install and occupy small land space. Some can be installed and made operational in less than 6 months. This fits well and is consistent within the concept of power sector privatization.

A small private electric company in Bangladesh may not have the large capital to install a large 400 MW power stations, (costing approximately 500 million dollar) but can raise the capital required to install several small 10 MW to 80 MW range power stations.

In natural gas fired power stations, there is no real technical or economic advantage in building very large power stations, such as one 400 MW compared to say five 80 MW station i.e. 80 x 5 = 400 MW. The natural gas consumption would practically be the same in both cases. So bigger is not better for natural gas fired power stations. However, coal and nuclear power stations nuclear needs to be of large MW generation capacity to be economically feasible. Small MW natural gas power station in the range 10 MW to 80 MW can prove to be more energy efficient because small MW stations can be positioned closer to load/consumers. Proper location of the power station can reduce grid network system loss because there will be no need for long distance power transmission that dissipates energy wastefully during electricity travel from source to far destinations.

Large power stations, such as 400 MW to 1000 MW are very expensive and require very special technical expertise to build, install and operate. Such stations exhibit more difficult power system network stability and control problems compared to the smaller MW power station which is much easier and simpler to control.

Why private sector will be successful: There are dozens of reasons as to why the private Bangladeshi electric companies will be successful in supplying electricity reliably to the consumers, whereas government and semi-government organizations cannot be.

In a private electric company, the investors and board of directors of the companies will hire the best and most talented management and technical team. Inefficient mangers, engineers, technicians, electricians and staff would be fired from their job. Such a job security does not exist in government or semi-government organizations in Bangladesh that run the power sector.

One prime reason for success would be that any power outage would mean immediate loss of revenue, financial loss and lower profits for the private electric companies. Thus, the investors and management of private electrical power companies would be vigilant to prevent any power interruptions or outages in order to safe guard their financial investments and protect their daily income derived from the sale of electricity every minute. In a private electric company, any power outage or interruption would be viewed and counted as so many dollars loss, e.g. 300 dollar revenue loss per minute. Power outages would mean less revenue for the private company that immediately affects the pockets of investors and bonuses of the employees. Thus, a sense of urgency would prevail to immediately fix any faults in the machines or in electrical network to restore electricity supply and resume revenue earning by the minute. Such a ‘sense of urgency’ does not exist in government or semi-government organizations responsible for electric supply.

Government’s role must be limited in power sector: In the developed countries of the world, the government is not involved in generating or selling electricity. In fact, government is not involved in any type of selling business. In the power sector, the role of the Bangladesh government should be limited only to electrical regulations, electrical safety, consumer protection, monopoly prevention, nuclear energy development; support for oil, gas and coal exploration required to meet the energy needs of Bangladesh. The policies created should be those which encourage local technical innovations by private enterprises, growth of local expertise and electrical industries, support for the free market economy and increase in employment opportunities in electrical power industries in Bangladesh.

Sources of investor funding: Foreign pension funds, mutual funds and venture capital funds are potential sources of funding that could build new power stations in Bangladesh. Also, private electric companies in Bangladesh could float a limited number of shares locally and overseas to raise money required for modernizing the electricity distribution network in Bangladesh.

Such funds could become available only if it can be proved that the rate of return on investment in the Bangladesh power sector can be higher than a typical foreign bank rate in fixed deposit accounts. Pension funds in foreign countries typically earn only about 2.1% return on investment. If investment in Bangladesh electric power sector could, as for example, gives 8% return on investment, then pension funds, mutual funds and venture capital investing in the Bangladesh power sector would become attractive to foreign fund managers in USA, Canada, Germany, France, Japan, Korea, China etc.

Investors will be attracted only if the power sector if fully privatized and if the profits and dividend returns from the private electric companies in Bangladesh is ensured by sound realistic business plan and correct mathematical calculations of potential revenue, expenses and profits.

Debt free power station and electric network in Bangladesh: If the power sector is 100% privatized then it may become possible to make natural gas fired power stations and distribution network debt free, with no loans with ADB or with World Bank or other lending banks. The government of Bangladesh may not need to burden each citizen of Bangladesh with local and foreign bank loans for these. However, for development of nuclear energy power stations, the government may need to take large loans.

Lower cost of power stations and electric network upgrade: After privatization, the private electric companies of Bangladesh can negotiate the best price and technology for new power stations and other equipment directly with the equipment manufactures. They can do this quickly without going through the tender process that the governments use. Direct negotiation with manufacturers could result in 35% to 50% lower purchase price compared to the cost that the government otherwise would have incurred due to lobbying interests and long bureaucratic processes followed in government purchases.

Shorter time for project completion: With privatization, the time taken to complete electrical power development projects could be 20% less than the time the government of Bangladesh would have taken. The private electric companies in Bangladesh would be more time efficient. In private business, time is considered money and there is urgency to finish projects quickly to reduce cost. The electrical power crises problem would be solved sooner. Thus increase in the GNP of Bangladesh could occur earlier due to sooner availability of uninterrupted supply of electricity to businesses and industries in Bangladesh.

No effect on electricity supply: After the power sector is fully privatized by the act of Bangladesh parliament, the government will get out of electricity supply business altogether. Any change in political parties and government in Bangladesh will not affect the quality of electric supply in Bangladesh. The private companies will take care of all present and future demands for electricity in the country and ensure reliable supply of electricity every minute to earn revenue and make profit. With such a positive change in Bangladesh, the future generation will enjoy higher quality of life due to better economy growth and increase in GNP.


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Syed Imtiaz Ahmed, EE. MEng.:Mr. Ahmed graduated from Bangladesh University of Engineering & Technology (BUET) in 1975 with a BSc. in Electrical Engineering and earned Master of Engineering Degree from Carleton University, Ottawa, Canada. Mr. Ahmed worked in General Electric Company (GEC) U.K. from 1978 to 1981 as Control Engineer and was the first to develop Microprocessors based automatic control system for the 1800 MW power station in Dinorwig, Wales. U.K. Mr. Ahmed is President of Signal Stream Inc. in Ottawa, Canada. Web site www.signalstream.ca). E Mail :