98267 The World Bank Group Bangladesh Fiscal Costs of Non-financial Public Corporations Naoko C. Kojo Economic Policy and Debt Department August 2010 Bangladesh: Fiscal Costs of Non-Financial Public Corporations 1 Naoko C. Kojo Contents 1. Introduction .............................................................................................................................................. 3 2. Non-Public Financial Corporation in Bangladesh ................................................................................... 3 2.1 Financial Performance of the NFPC Sector .................................................................................. 4 2.2 Fiscal transfers to NFPCs.............................................................................................................. 7 3. Bangladesh Power Development Board (PDB) ..................................................................................... 10 3.1 Power Sector Reform .................................................................................................................. 10 3.2 Tariff Analysis ............................................................................................................................ 11 3.3 Operation of PDB ....................................................................................................................... 13 3.4 Financial Performance of PDB ................................................................................................... 13 3.5 Fiscal Transfers to PDB .............................................................................................................. 19 4. Bangladesh Petroleum Corporation (BPC) ............................................................................................ 20 4.1 Petroleum Sector ......................................................................................................................... 21 4.2 BPC’s Operation ......................................................................................................................... 21 4.2 Tariff Analysis ............................................................................................................................ 23 4.4 Financial Performance ................................................................................................................ 24 4.5 Fiscal Transfers to BPC .............................................................................................................. 28 5. Fiscal Implication of New Power Purchase Agreements ....................................................................... 29 5.1 New Power Purchase Agreements .............................................................................................. 29 5.2 Fiscal Implication of New Power Purchase Agreements ............................................................ 30 6. Conclusion ............................................................................................................................................. 32 Appendix ..................................................................................................................................................... 34 References ................................................................................................................................................... 36 1 This paper has been prepared in response to a request from the Bangladesh country team. I am grateful for the assistance provided by the country team members for the collection of requisite information. My thanks go to Eduardo Ley (PRMED), Marijn Verhoeven (PRMPS), Daniel Altana (FIEL) and the IMF Bangladesh team for their very helpful comments. All the remaining errors are mine. 2 1. Introduction 1. The overall fiscal position of Bangladesh looks sustainable, but there are concerns that the country may be trapped in a low revenue-low capital spending equilibrium, which is holding back Bangladesh’s growth potential. Eliminating wasteful spending and halting fiscal drains through inefficient non-financial public corporations (NFPCs) are important ways to create fiscal space, particularly in the area of infrastructure. 2. This paper reviews the financial performance of the NFPC sector in Bangladesh, with a specific focus on two major loss-making firms: Bangladesh Petroleum Corporation (BPC) and Power Development Board (PDB). The objective of this paper is to update the Bank’s knowledge on the financial performance of the NFPC sector and estimate the fiscal costs emanating from the sector. 3. This paper was prepared based on the information available on the public domain, supplemented by the data provided by the Monitoring Cell of the Ministry of Finance as well as the existing knowledge base in the Bank. As the first phase of a multi-phased study, the analysis presented in this paper focuses exclusively on the financial aspects of the NFPC sector, and was carried out entirely away from the field on a desk basis, with the understanding that the next phase would involve information gathering on the ground. It is important to note that statistics on NFPCs are generally of poor quality. Data are often partial and inconsistent with each other even if they are obtained from the same sources. As such, the information and statistics presented in this paper should be interpreted with caution, although every effort was made to reconcile the inconsistent and sometimes conflicting information. 4. The study finds that the NFPC sector has indeed absorbed a considerable amount of fiscal resources. In FY2008 alone, for example, at least Tk. 378 billion (US$5.5 billion, or 7 percent of GDP) was channeled to the sector through explicit, implicit and quasi-fiscal means. Of this amount, transfers to PDB and BPC were estimated at over Tk. 151 billion (2.8 percent of GDP), around 40 percent of total fiscal assistance to the NFPC sector. Considering Bangladesh’s limited revenue mobilization capacity, the large fiscal costs associated with inefficient enterprises represent a major fiscal drain, which crowds out spending for more productive purposes. Indeed, the economic costs associated with the mismanagement of NFPCs in terms of lost growth opportunities and unemployment must be significant. 5. The study also shows considerable fiscak risks from the newly signed power purchase agreements, an emergency response to the ongoing power crisis. Scenario analysis suggests that the new agreements are likely to emtail very large costs to PDB, raising the firm’s net loss from Tk. 9 billion in FY2009 to beyond Tk. 100 billion in FY2011, even if the average tariff is raised by 15 percent. PDB would face serious liquidy problems, requiring significant fiscal assistance to continue its core business. Regardless of how resources are transferred, the fiscal and economic implications would be considerable. 6. The structure of the paper is as follows. Section 2 will provide an overview of the recent development in the NFPC sector, with a view to identifying financially troubled enterprises. Sections 3 and 4 will respectively review the financial performance of the two major loss-making NFPCs—PDB and BPC—and attempt to estimate the magnitude of fiscal resources transferred to them in a variety of means. Section 5 will turn attention to the recent power purchase agreements signed and estimate their budgetary implications. Finally Section 6 will conclude the paper. 2. Non-Public Financial Corporation in Bangladesh 7. In Bangladesh, NFPCs engage in an extensive range of commercial and quasi-fiscal activities. Currently, there are 45 NFPCs operating in seven broad industrial sectors: manufacturing, utilities, 3 transport and communication, commerce, agriculture and fisheries, construction and services and other sectors. Most of the NFPCs operate under government regulations and are subject to interventions in pricing, operation and management. 2.1 Financial Performance of the NFPC Sector 8. Performance of the NFPC sector as a whole has been unsatisfactory. According to the data obtained directly from the Monitoring Cell—Non-financial Public Enterprise Economic Classification of Estimates (see Appendix)—the sector has chronically reported a net loss for the past two decades, except for FY2009, when it recorded a net profit after tax, of Tk. 20 billion (Table 1).2 Table 1. Consolidated Financial Results of Non-financial Public Corporations /1 (in billions of Taka, unless otherwise indicated) FY05 FY06 FY07 FY08 FY09 Operating revenue 359.4 459.4 500.6 551.7 668.0 Operatnig surplus -25.7 -16.1 -18.6 -32.5 38.3 Non-operating income (net) -3.5 -4.7 -1.3 -3.5 -7.0 o/w Grants/subsidies 0.1 0.1 0.1 0.1 0.1 o/w Financing charges 9.4 12.0 12.4 12.8 16.0 Net profit before tax -29.2 -20.8 -19.9 -36.0 31.3 Direct tax 1.3 5.2 6.9 9.1 10.9 Net profit after tax -30.6 -26.0 -26.8 -45.1 20.5 Dividend 0.1 4.8 5.6 5.7 7.2 Memorandum items: Total assets 1,252.2 1,327.7 1,621.5 1,558.5 1,631.8 Equity 361.6 348.1 508.3 555.2 538.5 Value added 8.6 27.6 26.5 19.8 87.5 Net profit after tax in percent of GDP (%) -0.8 -0.6 -0.6 -0.8 0.3 Value added in percent of GDP (%) 0.2 0.7 0.6 0.4 1.4 Operating profit in percent total assets (%) -2.1 -1.2 -1.1 -2.1 2.3 Dividends in percent of equity (%) 0.02 1.37 1.10 1.02 1.33 Sources: Non-financial Public Enterprise Economic Classification of Estimates for the year 2004-05, 2005-06, 2007-08, and 2008-09 (Annual Audited Data), obtained directly from Monitoring Cell. 1/ Note that the net loss for FY08 is likely to be under-estimated and the net profit for FY09 over-estimated, since it does not include the financial results of Bangladesh Biman Corporation (BBC), a chronic loss-making corporation. The magnitude of under/over-estimation is likely to be rather limited, however, because the firm’s net loss is usually small. 9. Five NFPCs—Bangladesh Oil, Gas and Mineral Resources Corporation (BOGMC or Petrobangla), Chittagong Port Authorities (CPA), Bangladesh Telecommunication Regulatory Commission (BTRC), Rural Electric Board (REB) and Chittagong Development Authority (CDA)—have shown a particularly strong performance over the past five years, constantly reporting a positive net profit. Of the five enterprises, Petrobangla has been the main contributor to the national budget through corporate tax and dividend payments. In FY2009 alone, Petrobangla made a contribution in the amount of Tk. 12 billion, accounting for over 70 percent of the overall NFPCs’ contribution to the budget. 2 Note that net losses were made even after the sector received various explicit, implicit and quasi-fiscal transfers. See below for further discussions. 4 10. In sharp contrast, four companies have chronically reported a net loss, attributing to the bulk of the consolidated NFPC net losses. They are Bangladesh Petroleum Corporation (BPC), Bangladesh Power Development Board (PDB), Bangladesh Jute Mills Corporation (BJMC) and Bangladesh Sugar and Food Industries Corporation (BSFIC), in the order of loss magnitude. 11. Indeed, if these four enterprises Figure 1. Net Profit/Loss of NFPCs (after tax) are excluded, one finds considerable (in billions of FY00 Taka) improvements in the consolidated 40 BPC financial results of the sector since PDB 30 FY2003 (Figure 1 and Table 2), although BJMC BSFIC this achievement should be discounted on 20 Others account of vatrious fiscal supports 10 Consolidated NFPC net profit/loss extended to the sector (see below for further discussions). The exclusion of the 0 four enterprises also reveals that NFPCs -10 other than these four have in general made -20 a decent tax contribution to the budget; the effective income tax rate ranges -30 between 14 percent and 27 percent against -40 the statutory corporate income tax rate of -50 27.5 percent and 37.5 percent for publicly and non-publicly traded companies.3 -60 Source: Author’s calculation based on data obtained directly from the 12. Among the four enterprises, the Monitoring Cell. large losses made by PDB and BPC are particularly noteworthy. During FY2008 and FY2009, these two enterprises together accounted for 82-95 percent of the consolidated NFPC net loss. Table 2. Financial Indicators (in percent) FY05 FY06 FY07 FY08 FY09 Value added in percent of GDP All NFPCs 0.2 0.7 0.6 0.4 1.4 Excluding PDB, BPC, BJMC and BSFIC 0.7 1.2 1.1 1.4 1.4 Net profit after tax in percent of GDP All NFPCs -0.8 -0.6 -0.6 -0.8 0.3 Excluding PDB, BPC, BJMC and BSFIC 0.2 0.4 0.4 0.7 0.8 Operating profit in percent of total assets All NFPCs -2.1 -1.2 -1.1 -2.1 2.3 Excluding PDB, BPC, BJMC and BSFIC 0.7 2.0 1.8 4.1 5.3 Return on equity All NFPCs 0.0 1.2 1.2 1.1 1.4 Excluding PDB, BPC, BJMC and BSFIC 0.0 1.4 1.1 1.0 1.3 Effective income tax rate All NFPCs -4.6 -25.2 -34.7 -25.2 34.6 Excluding PDB, BPC, BJMC and BSFIC 14.6 22.7 26.4 19.0 17.6 Source: Author’s calculation based on Non-financial Public Enterprise Economic Classification of Estimates for the year 2004-05, 2005-06, 2007-08, and 2008-09 (Annual Audited Data), obtained directly from Monitoring Cell. 3 http://www.nbr-bd.org/incometax.html. 5 13. At this point, it is important to ponit out serious data issues regarding NFPCs in Bangladesh. Statistics on the NFPC sector are generally weak and unreliable. Data are often significantly inconsistent even when they are obtained from the same source. Table 3 shows the financial results of the consolidated NFPC sector, presented in various parts of the Bangladesh Economic Review 2009, and compares them with those reported in Non-financial Public Enterprise Economic Classification of Estimates obtained from the Monitoring Cell (as presented in Table 1). Interestingly, all the tables presented in the Bangladesh Economic Review 2009 refer to the Monitoring Cell as the data source, but often the reported figures differ, sometimes by a large margin. Further investigation is warranted to clarify what explains the large differences. Table 3. Financial Results of NFPCs from Various Sources (in billions of Taka) FY05 FY06 FY07 FY08 FY09 Operating revenue Economic Review (Table 9.1, p. 120) 362.7 443.4 331.8 200.2 - Economic Review (Table 9.3, p. 122) 362.7 443.4 500.6 200.2 - Economic Review (Appendix 35, p. 293) - - - - - Obtained directly from Monitoring Cell 359.4 459.4 500.6 551.7 668.0 Operating surplus Economic Review (Table 9.1, p. 120) -24.7 -27.0 -15.7 36.1 - Economic Review (Table 9.3, p. 122) -24.7 -27.0 -18.6 36.1 - Economic Review (Appendix 35, p. 293) - - - - - Obtained directly from Monitoring Cell -25.7 -16.1 -18.6 -32.5 38.3 Dividend contribution Economic Review (Table 9.3, p. 122) 0.6 2.9 5.6 5.4 - Economic Review (Appendix 36, p. 294) 5.7 2.4 0.6 0.4 4.1 Obtained directly from Monitoring Cell 0.1 4.8 5.6 5.7 7.2 Net profit after tax Economic Review (Table 9.1, p. 120) - - - - - Economic Review (Table 9.3, p. 122) -29.3 -34.4 -26.8 27.9 - Economic Review (Appendix 35, p. 293) -26.8 -28.5 -26.8 -38.4 -20.5 Obtained directly from Monitoring Cell -30.6 -26.0 -26.8 -45.1 20.5 Sources: Bangladesh Economic Review 2009 and Non-financial Public Enterprise Economic Classification of Estimates for the year 2004-05, 2005-06, 2007-08, and 2008-09 (Annual Audited Data), obtained directly from the Monitoring Cell. Note that revised data for FY09, to be published in the Bangladesh Economic Review 2010 (forthcoming), are not reflected in this table. 14. As of end-June 2009, the NFPC sector’s liabilities to the central government were estimated at Tk. 727 billion (or about 12 percent of GDP), of which Tk. 545 billion was in arrears ( 15. Table 4). The status of such liabilities is uncertain as it does not appear that the government is actively pursuing the collection of these liabilities. PDB held, by far, the largest debt service liabilities to the government. Its debt to the government stood at Tk. 340 billion (including arrears of Tk. 295 billion), about 47 percent of total NFPCs’ liabilities to the government. Data on the NFPC sector’s debt to the government are weak. While attempts were made to generate time series data based on past issues of the Bangladesh Economic Reviews, significant data inconsistencies across time and series have hampered the creation of a meaningful time series database. 6 Table 4. NFPCs’ Debt to Central Government as of June 30, 2009 (in billions of Taka) Principal Arrears Total outstanding Principal Interest Total 182.3 206.5 338.1 726.9 Of which PDB 44.5 103.9 191.3 339.7 Petrobangla (BOGMC) 13.3 29.8 46.6 89.6 BCIC /1 8.7 25.5 32.2 66.4 Source: Bangladesh Economic Review 2009 (Appendix 37, p. 295). 1/ Bangladesh Chemical Industries Corporation, whose main products include fertilizer. 16. The extent of NFPCs’ overall indebtedness is unknown, although their liabilities to the government are likely to account for the major portion of their total debt. While the Bangladesh Economic Review 2009 presents the NFPCs’ outstanding and classified loans from the domestic banking system, of Tk. 142 billion, this is believed to be only the tip of the iceberg. Over time, the enterprises have “borrowed” from domestic banks in the form of overdrafts, received foreign loans (not as on-lending from the government) and accumulated arrears to suppliers. 17. Likewise, the extent of government explicit contingent liabilities associated with NFPCs is unknown. While the central government’s explicit guarantees to public enterprises (both financial and non-financial) are published in the Budget in Brief (Statement VIA) since FY2008, the reported figures are for original loan principals only.4 Information on the outstanding principals of guaranteed loans and their service schedule is unavailable, hampering assessment of fiscal risks from explicit guarantees. Information regarding the explicit guarantees actually invoked—that is, debt service payments passed onto the government—is not regularly published. Nonetheless, given that the bulk of government bail- outs in the past were associated with un-guaranteed obligations as we will show in the reminder of this paper, risk assessment based on explicit guarantees would be by far in adequate in the case of Bangladesh. 2.2 Fiscal transfers to NFPCs 18. To keep NFPC financially afloat, the government has transferred a significant amount of fiscal resources to NFPCs through explicit and implicit means, as well as quasi-fiscal channels through non- government public sector entities. Generally speaking, explicit fiscal transfers are those that entail immediate cash movements from the budget, and are recorded explicitly as government expenditure and lending in the budget. In contrast, implicit transfers do not inolve immediate cash movement. Because of this, and because of the difficulties in quantifying some of the transfers, implicit fiscal assistance is often un-recorded and hidden from the public eye.5 Quasi-fiscal transfers, which may or may not involve cash transfers, occur outside the national budget framework, but within the public sector. 19. Explicit budgetary financing to NFPCs has been provided in the form of current grants/subsidies, equity financing, government loans (including on-lending) and ADP appropriation as project financing (i.e., capital transfer). When the central government assume liabilities owed by NFPCs (guaranteed or not) involving immediate cash payment out of the national budget, this payment is regarded as an explicit fiscal transfer. 4 www.mof.gov.bd/en/budget/10_11/brief/en/st6A.pdf?phpMyAdmin=GqNisTr562C5oxdV%2CEruqlWwoM5 5 Some of the implicit transfers, for example, forgone dividends and corporate tax, are not easily quantifiable, and thus are not recorded. 7 20. Implicit fiscal support to NFPCs has taken a number of forms, such as defaults on government loans (i.e., accumulation of arrears on government loans), take-over of an NFPC’s liabilities through bond issues (i.e., not involving immediate cash payment from the budget), deferred tax payments, including incompliance of tax obligations (VAT, duties and corporate tax), forgone dividend and corporate tax payments on account of NFPCs’ poor financial performance, ex-post conversion of loans to equity or grants, recapitalization of state-owned commercial banks prompted by the accumulation of NFPCs’ non- performing loans,6 running down of company assets, and so on. 21. Quasi-fiscal transfers to NFPC have included build-up of payables within NFPCs (inter-enterprise arrears), input subsidization through other NFPCs, and borrowing from nationalized commercial banks, as well as the accumulation of overdrafts from these banks. If the interest rate charged on the loans from state-owned commercial banks is subsidized, the differential between the market interest rate and the rate applicable to the loan also constitutes additional quasi-fiscal transfers to NFPCs. 22. The choice regarding the form of fiscal transfer appears rather ad hoc. It is generally believed that the magnitude of implicit and quasi-fiscal assistance to NFPCs has outweighed the explicit transfers by a large margin. 23. Quantifying the total fiscal and quasi-transfers to NFPCs, in a comprehensive manner, is extremely tricky, due to data weaknesses as well as the un-measurable nature of some of the implicit transfers, for example forgone dividend and direct tax payments. While some information, such as individual NFPCs’financial results and their debt service liabilities to the central government (including arrears) are monitored and recorded by the Monitoring Cell of the Ministry of Finance, data are often sketchy and there are a number of inconsistencies across time and entry. 24. Available information suggests that fiscal and quasi-fiscal transfers to NFPCs amounted to, at least, Tk. 378 billion (US$ 5.5 billion) in FY2008 and Tk. 345 billion (US$ 5 billion) in FY2009, about 6.9 percent and 5.6 percent of GDP, respectively (Table 5). Note that these figures are partial estimates and do not include many other fiscal transfers, for which detailed information is unavailable. For example, while it is believed that transport NFPCs benefited from subsidized fuels, the lack of information on volume of petroleum products they purchased from BPC and the price paid for each product makes it impossible to estimate the fiscal costs of such subsidies.7 Another example is the invoked government guarantees on NFPC loans, on which again information is unavailable at least on the public domain. Of the Tk. 374 billion provided to NFPCs during FY2008, fiscal transfers to PDB and PBC were estimated at Tk.151 billion, about 40 percent of total assistance to NFPCs during that year, as we will discuss in greater details in Sections 3 and 4. 6 Bangladesh Bank Annual Report (2009) reports that a large non-performing loan portfolio has been the major predicament of banks, particularly of state owned commercial banks (p. 37). 7 These NFPCs would include Bangladesh Shipping Corporation (BSC), Bangladesh Inland Water Transport Corporation (BIWTC), Bangladesh Biman Corporation (BBC), and Bangladesh Road Transport Corporation (BRTC). 8 Table 5. Various Fiscal Transfers to NFPCs (in billions of Taka) FY08 FY09 Explicit transfer 70.5 97.3 Grants/subsidies 0.1 0.1 Government loans (net) 1.8 2.7 Equity injection 23.7 19.3 ADT (capital transfer) 44.8 75.3 Implicit transfer 85.0 58.7 Accumulation of arrears on gov. loans (net) 11.3 58.7 Take-over of NFPC liabilities thru bond issue /1 73.7 0.0 Quasi-fiscal transfer 222.3 188.6 Gas subsidies to PDB and BCIC 110.0 75.8 Petrol subsidies to PDB /2 3.6 0.0 Net credit from banking system 108.7 112.8 Total 377.7 344.6 In percent of GDP 6.9% 5.6% Sources: Author’s calculation based on Bangladesh Economic Review (2008, 2009), Bangladesh Bank Annual Report (2008, 2009), and Non-financial Public Enterprise Economic Classification of Estimates for the year 2004-05, 2005-06, 2007-08, and 2008-09 (Annual Audited Data), Budget in Brief (2007-08, 2008-09), and information obtained from www.petrobangla.org.bd. 1/ See Table 6. There was no take-over of NFPC liabilities through issuance of government securities in FY2009. 2/ There were no fuel subsidies to PDB in FY2009 when international prices of petroleum products dropped just below PDB’s purchase prices. See Table 13. 25. Explicit transfers to NFPCs—resource transfers to NFPCs out of national budget—accounted for a small proportion of the total fiscal transfers to NFPCs, estimated at Tk. 70 billion in FY2008 and Tk. 97 billion in FY2009. Equivalently, the government of Bangladesh spent 11 percent and 14 percent of its revenue on NFPCs in FY2008 and FY2009 respectively. Equity injections and capital transfers were the two main forms of explicit fiscal transfers, whereas current grants/subsidies as well as borrowing from the government (net)—estimated from the stock figures—were rather limited in these years. 26. By accumulating its arrears on government loans, the NFPC sector received Tk. 11 billion and Tk. 59 billion in FY2008 and FY2009, respectively, as implicit transfers. The central government’s take-over of NFPCs’ liabilities to banks, in the mount of Tk. 74 billion, through the issuance of Treasury bonds in FY2008 also constituted part of the implicit transfer to the NFPC sector (Table 6).8 Table 6. Issuance of Government Security for the Take-over of NFPC liabilities in FY2008 (in billions of Taka) Name of Security Objective Amount 3-year (Pubali Bank) Treasury Bond To repay the loan of BADC 0.2 2-year & 3-year BPC Treasury Bond To repay the loan of BPC 18.0 BPC Treasury Bond (5-year and above) To repay the loan of BPC 55.3 5-year BSFIC Treasury Bond To repay the loan of BSFIC to Janata Bank 0.2 Total 73.7 Source: Bank of Bangladesh Annual Report (2008, 2009). 8 The liabilities of Tk. 74 billion were related to losses that were financed by bank loans. 9 27. Finally, if we assume that the bulk of net credit to NFPCs was provided by state-owned commercial banks—a plausible assumption as profit-maximizing private banks are likely to shy away from financially unviable enterprises—then the estimated quasi-fiscal assistance through the banking system stood at Tk. 109 billion and Tk. 113 billion in FY2008 and FY2009, respectively. Some of these credits could become viable, ex post, if and when the NFPCs became commercially viable. Input subsidies (gas, petroleum products) to NFPCs were particularly large in FY2008, estimated at Tk. 114 billion, because of the wide gap between world and domestic administered prices. With the fall in international commodity prices, quasi-fiscal transfers through input subsidized shrank in FY2009, to Tk. 76 billion. This is still a large amount. 28. The remainder of this paper focuses on the financial performance of Bangladesh Power Development Board (PDB) and Bangladesh Petroleum Corporation (BPC), the two main loss-making enterprises, and estimates the magnitude of fiscal resources they have absorbed over time. 3. Bangladesh Power Development Board (PDB) 3.1 Power Sector Reform 29. The Bangladesh power sector has experienced numerous institutional and operational changes during the past decades. Through policy frameworks proposed by several documents, including the Power Sector Reform in Bangladesh (1993) and National Energy Policy (1996), the sector has undergone a series of reforms—including sector unbundling, private sector participation, corporatization of entities and establishment of an independent regulatory commission—in order to harness competition, encourage private participation and ensure operational improvements and financial solvency of power sector entities. 30. The main power entity, PDB, has Figure 2 Current Structure of the Power Sector /1 been unbundled into separate companies. New power generation companies, Ashuganj Power Station Company (APSCL) and Electricity Generation Company of Bangladesh (EGCB), have been created by transferring some of the generation assets of PDB. Private sector involvement, permitted in 1996, has been gradually increasing, adding generation capacity to the country’s total electricity generation. Transmission has been separated from PDB through the creation of Power Grid Company of Bangladesh (PGCB), whereas Dhaka Electric Supply Authority (DESA) has been created to Source: Power Cell (www.powercell.gov.bd). The chart is not updated operate and develop distribution systems with the transformation of DESA to DPDC. in and around Dhaka (including the metropolitan city), improve services to the consumers and enhance revenue collection by reducing high system losses. Subsequently DESA has been transformed as Dhaka Power Distribution Company (DPDC) as part of the corporatization process. 31. Following the passing of the Bangladesh Energy Regulatory Commission Act, the Bangladesh Energy Regulatory Commission (BERC) was established in March 2003 with the task of strengthening the independent regulation and oversight of the market of electricity, gas and petroleum products in 10 Bangladesh. The commission became effective in April 2004, but the agency is just becoming operational now after long delays. As in other countries, the regulator has the authority to set wholesale and retail tariffs of electricity, gas and petroleum products, as well as to issue and revoke licenses in the energy sector. The Ministry of Power, Energy and Mineral Resources is now solely responsible for setting the overall policy framework, overseeing state-owned energy enterprises. 32. The reform has so far failed to achieve the intended objectives in terms of improved competition, increased private sector participation, and most importantly, reliable supply of electricity. There are, however, some positive results such as the marked reduction in system losses and improved revenue collection. Still, PDB continues to make large losses, while some new entities, such as PGCB and DESCO are earning profits. Frequent load shedding is perennial and is causing serious impacts on commercial activities and discomfort in the life of citizens. Currently, the country is facing around 1,500 MW of power shortages, a margin that will take years to narrow given the lack of public funds available and the long lead times between securing funding and the completion of new power plants. 3.2 Tariff Analysis 33. Electricity tariffs are set by BERC for both retail and bulk supply of electricity. BERC issued its first ever tariff order on March 1, 2007. The latest tariff adjustment (second tariff order) became effective on March 1, 2010 (Table 7). Currently, PDB, DPDC, DESCO and WZPDC charge identical retail tariffs. 34. The tariff structure in Bangladesh is standard, charging different tariffs for different consumer categories. Residential users pay a fixed charge and a variable increasing block-charge based on the consumption level. As in many countries, cross-subsidization exists between customer categories, with the commercial sector covering the bulk of the cross-subsidy. Electricity bills for retail consumers include VAT of five percent on the total value of electricity consumed as well as the service and demand charges. The VAT collection goes directly into the Treasury Account from banks, through which consumers pay the bill, without channeling PDB. 35. The tariff adjustment process is not very transparent. Although an electricity pricing formula was adopted in 2003 as part of the Bank’s financial support to the country, the implementation of the formula has never happened. Similarly, while the Bangladesh Energy Regulatory Commission Electricity Distribution Tariff Regulation (2008) requires that licensees file a tariff application on a cost-plus basis, it is said that the tariffs determined by BERC often reflect signals (and sometimes directions) from the government, which treats power price adjustments with great sensitivity and in a coordinated fashion with adjustments to the administered prices of food, petroleum products, natural gas and fertilizers (all of them are subsidized). 11 Table 7. PDB Tariff Schedule (excluding VAT) Effective from March 1, 2010 Tariff per kWh Service Charge Demand Charge Minimum Charge Consumer Class (Tk) (US¢ eqv.) (Tk/month) (Tk/kWh, month) (Tk/KW, month) A: Residential a) First Stage: 0-100kWh 2.6 3.9 1 phase: 6 12 100 b) Second Stage:101-400kWh 3.3 4.9 3 phase: 27 c) Third Stage: >400kWh 5.65 8.5 35 (for approved B: Agricultural pump 1.93 2.9 25 125 demand of < 30KW) C: Small industry 37 a) Flat 4.35 6.5 (for approved 63 n/a b) Off-peak 3.5 5.2 demand of c) Peak 5.95 8.9 < 40KW) 1 phase: 5 D: Non residential light & power 3.35 5.0 15 100 3 phase: 25 E: Commercial a) Flat 5.58 8.4 1 phase: 6 22 125 b) Off-peak 4.05 6.1 3 phase: 27 c) Peak 8.45 12.6 F: Medium voltage general usage (11KV) 42 a) Flat 4.17 6.2 355 (for maximum 80 b) Off-peak 3.43 5.1 demand) c) Peak 7.12 10.7 G-1: Extra high voltage DESA 2.415 3.6 None n/a 80 (132KV) G-2: Extra high voltage general purpose ( 132 KV) a) Flat 3.1 4.6 37 b) 23:00-6:00 HRS 1.63 2.4 None (for maximum 80 c) 6:00-13:00 HRS 2.72 4.1 demand) d) 13:00-17:00 HRS 1.82 2.7 e) 17:00-23:00 HRS 5.94 8.9 H: High voltage general purpose (33 KV) 37 a) Flat 3.92 5.9 410 (for maximum 80 b) Off-peak 3.33 5.0 demand) c) Peak 6.82 10.2 I-1: PBSs 2.0389 3.1 400 n/a n/a I-2: DESCO a) 132KV (flat) 2.415 3.6 None n/a n/a b) 33KV (flat) 2.4452 3.7 I-3: WZPDCL a) 132KV (flat) 2.415 3.6 None n/a n/a b) 33KV (flat) 2.4452 3.7 I-4: a) Other PDB zones (132KV) 2.415 3.6 None n/a n/a b) Other PDB zones (33KV) 2.4452 3.7 J: Street light & water pump 3.98 6.0 205 37 n/a Source: www.bpdb.gov.bd. 12 3.3 Operation of PDB 36. PDB is responsible for a major portion of generation and distribution of electricity mainly in urban areas of the country, except for metropolitan city of Dhaka and its adjoining area. 37. As of end-FY2009, PDB had access to total installed capacity of 5,493 MW, including 1,330 MW in independent power producers (IPPs) and 351 MW in rental power plans. The installed capacity of PDB, including its two generation companies, was 3,812 MW. 38. Of the total installed capacity of 5,493 MW, the maximum available generation capacity however was only 4,162 MW, that is, only three fourth of installed capacity was available for generation. The gap between the installed capacity and actual production is, according to the recent Budget speech, attributable to the erosion in capacity utilization due to aging, defective and inadequate transmission and distribution system, as well as shortages of natural gas, the main fuel used for power generation.9 39. During FY2009, 15,449 GWh of net energy was generated in the public sector power plant under PDB. In addition, PDB purchased 10,173GWh of electricity from IPPs and rental power plants in the private sector at a fixed rate. The net energy generated by public and private sector plants stood at 25,622 GWh. PDB sold about 85 percent of total energy generation to four distribution companies, DPDC, REB, DESCO and WZPDC (“bulk supply”), and distributed the remainder to its distribution areas. 40. The main fuel for power generation is natural gas (88.4 percent), followed by furnace oil (3.9 percent) and diesel (2 percent). Domestic prices of these fuels are regulated and fixed by BERC at substantially below market levels. The subsidized fuels serve as a significant input subsidy to PDB, lowering its costs of sales and raising the operating profit unless otherwise. 3.4 Financial Performance of PDB 41. PDB’s financial statements show that the enterprise is facing serious viability problems. Since the mid-1990s, year after year it has incurred an operating and net loss (Table 8). PDB has made no dividend and corporate tax payments to the national budget for quite some time. As stated earlier, VAT on electricity supply goes directly to the national budget without being channeled through PDB. Table 8. PDB Income Statement (in billions of Taka) FY05 FY06 FY07 FY08 FY09 Operating revenue 44.7 46.6 49.6 55.9 63.6 o/w electricity sales 43.6 45.9 48.0 53.9 61.5 Operating expenses 47.7 53.5 56.4 62.5 70.2 Operating profit/loss -3.0 -6.9 -6.8 -6.6 -6.5 Non-operating expenses (net) /1 3.1 2.4 2.3 3.3 1.8 Net profit/loss -6.1 -9.4 -9.0 -9.8 -8.3 Sources: PDB and Monitoring Cell. 1/ Includes finance charges, exchange losses, etc. 9 See Budget Speech of June 10, 2010, p. 17. To be precise, it is not the shortages of gas, but inadequate infrastructure (distribution network) that is constraining gas supply and hence contributing to the erosion in generation capacity. 13 42. One major factor contributing to PDB’s poor financial performance is the non-economic electricity tariffs that are set below the cost recovery level. In FY2009, PDB’s effective tariff—calculated by dividing the firm’s revenue from energy sales by the volume sold—was Tk. 2.68 per kWh in FY2009, equivalent to US¢3.9 (Table 9). This is very low by regional and international standards. For example, in India, where power is heavily subsidized, the tariff per unit of power is US¢8 for domestic consumers and US¢16 for commercial supply.10 Over time PDB’s effective tariff has eroded considerably in real terms, as the rates of tariff adjustments have fallen behind the rate of inflation (Table 10).11 The effective tariff in FY2009 was worth only 70 percent of that in FY2000 in real terms. Table 9. PDB Effective Tariff by Customer (FY2009) /1 Effective tariff per kWh Consumer class Taka US¢ eqv. Residential 3.2 4.6 Agricultural 1.9 2.8 Industrial 4.2 6.0 Small Industrial 4.4 6.3 Medium Voltage General Purpose 4.2 6.1 High Voltage General Purpose 3.9 5.7 Commercial 5.6 8.1 Bulk supply 2.4 3.5 Extra High Voltage (DPDC) 2.4 3.5 REB 2.3 3.4 DESCO 2.5 3.6 WZPDC 2.5 3.6 Extra High Voltage General Purpose 2.7 3.9 Other 3.9 5.7 Non-residential Light & Power 3.6 5.2 Street Lights & Water Pumps 4.4 6.3 Effective tariff (total) 2.7 3.9 Source: World Bank. Table 10. PDB Effective Tariff per kWh (nominal and constant prices) FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 Nominal Taka 2.2 2.3 2.3 2.5 2.4 2.3 2.2 2.3 2.4 2.7 Constant FY00 Taka 2.2 2.2 2.2 2.2 2.1 1.8 1.7 1.6 1.5 1.5 Inflation (period average, %) 2.8 1.9 2.8 4.4 5.8 6.5 7.2 7.2 9.9 6.7 Source: World Bank data. 10 http://en.wikipedia.org/wiki/Electricity_sector_in_India. 11 Note however that the average tariff declined even in nominal terms, especially during FY05-07 for unknown reasons. 14 43. Against the effevtive tariff of Tk 2.68 per kWh, PDB’s cost price per unit of Figure 3. PDB Effective Electricity Tariff and Cost Price electricity—break-even tariff—in FY2009, (Taka per kWh) derived based on the “actual” cost-plus basis (Table 11) was Tk. 3.07 per kWh (including Supply cost input subsidies, see below for further discussions), suggesting that PDB made, on average, a loss of Tk. 0.39 on each unit of electricity it sold during the year.12 This translates an annual loss of over Tk. 9 billion Effective tariff (Table 12), or US$134 million. PDB’s losses are mainly concentrated in the bulk supply business (power sales to distribution companies), while the loss emanating from the agriculture sector, for which the tariff is the lowest, is limited given the small volume of energy consumed by this consumer class. Over time, the wedge between the effective Source: Author’s calculation based on PDB Annual Report (2009). tariff and PDB’s cost price has grown (Figure 3). Table 11. PDB Revenue Requirement Based on Actual Cost Build-up in FY2009 /1 (in millions of Taka, unless otherwise indicated) Total costs 73,374 Cost of sales 56,363 Fuel costs (subsidized) 18,905 Electricity purchase from IPP 23,849 Electricity purchase from Rental Plants 6,979 Electricity purchase from Public Plants 5,990 Wheeling charges 1,313 Repairs & maintenance 3,019 Salaries & wages 3,680 Admin. expenses 773 Depreciation 7,381 Financing & other charges 2,087 Exchange rate fluctuation 335 Other (net) -267 Total revenue requirement (a) 73,374 Energy sales (GWh) (b) 23,937 Break-even tariff (Taka/kWh) (a/b) 3.07 Source: Author’s calculation based on PDB Annual Report (2009). 1/ Note that the derived break-even tariff is below market levels on account of fuel subsidies. See text. 12 Note it is not a levelised energy cost (LEC), which reflects all the costs over the lifetime of an energy-generating system, including the cost of capital. 15 Table 12. Estimated PDB’s Loss from Subsidized Energy Tariff (FY2009) (in millions of Taka) Sales Loss Actual Hypothetical /1 Residential 7,093 6,880 213 Agricultural 267 424 -157 Industrial 8,172 6,021 2,151 Commercial 3,189 1,752 1,437 Bulk 44,866 57,874 -13,007 Other 528 414 114 Total 64,115 73,374 -9,259 Source: Author’s calculation. 1/ Estimated using the cost price of Tk. 3.07 per kWh and actual volume of sales by customer class. Note that Tk. 3.07 is below a market cost price on account of subsidized inputs. See text. Table 13. Fuel Subsidies to PDB in FY2008 and FY2009 /1 (in billions of Taka unless otherwise indicated) FY2008 FY2009 No fuel Estimated No fuel Estimated Actual Actual subsidies subsidies subsidies subsidies Gas 11.2 83.5 72.3 11.9 63.7 51.8 Unit cost (Tk/’000 cubic ft) 73.9 552.8 73.9 395.4 Volume (mln. cubic ft) 150,992 150,992 161,008 161,008 Furnace oil 2.1 3.7 1.5 2,189 1.9 -0.3 Unit cost (Tk/litre) 15.5 26.9 24.3 20.9 Volume (mln. liter) 137.1 137.1 90.3 90.3 HSD, SKO, LDO 3.7 5.7 2.0 4.8 4.3 -0.6 Unit cost (Tk/liter) 32.9 50.9 42.7 37.8 Volume (mln. liter) 111.5 111.5 112.8 112.8 Total 17.0 92.8 75.9 18.9 69.8 50.9 Fuel subsidy (Taka/kWh) /2 3.35 2.13 Source: Author’s calculation based on information in PDB Annual Report (2008 and 2009) and World Bank DECPG GEM database. 1/ Actual fuel costs are derived from the actual volume and actual unit price (period average) of fuels as reported in PDB Annual Report (2008 and 2009). No subsidy fuel costs are derived from the actual volume of fuels PDB purchased during the year, and international price of each product (period average), converted to Taka. 2/ Derived by dividing the estimated fuel subsidies by the volume of electricity sold. 16 Figure 4. Comparison: International and PDB’s Purchase Prices of Fuels Natural Gas (Taka/1000 cubic feet) High-speed Diesel (Taka/liter) 900.0 80.0 800.0 70.0 International price International price PDB's purchase price PDB's purchase price 700.0 60.0 600.0 50.0 500.0 40.0 400.0 30.0 300.0 20.0 200.0 10.0 100.0 0.0 0.0 Furnace Oil (Taka/liter) 45.0 40.0 International price 35.0 PDB's purchase price Table 14. PDB Accounts Receivable (in billions of Taka) 30.0 25.0 Retail consumers 9.8 20.0 DPDC (DESA) 29.4 DESCO 1.1 15.0 WZPDCL 2.9 10.0 REB 1.9 5.0 Total 45.0 Source: Auditor’s Report and Accounts of PDB 0.0 (2008). Sources: PDB Annual Report (2009) and World Bank DECPG GEM database. 44. The financial problem of PDB has been aggravated by the accumulation of accounts receivable from consumers—mostly public power distribution companies—which has caused serious payments gridlock and liquidity problems to PDB (Table 14). As of end-FY2008, PDB’s accounts receivable amounted to Tk. 45 billion, equivalent to 80 percent of the firm’s operating revenue in the same year. Of this amount DPDC (DESA) alone accounted for Tk. 29 billion (65 percent of total receivables). 45. Faced with severe liquidity problems, PDB has accumulated payables to contractors and fuel suppliers. PDB’s payables were estimated at Tk.9.1 billion at end-FY2008. This is much smaller compared with its receivables. No information is available regarding to whom this amount is payable. PDB’s payments to IPPs for the purchase of power—believed to be guaranteed by the central government—appear current at present, especially since July 2007, when the central government began to make a monthly transfer of Tk. 500 million with the aim of ensuring PDB’s timely and full payments to IPPs.13,14 The exact nature of this transfer is unclear as discussed further below. 13 PDB’s payments to IPPs are not included in the list of government’s guarantees published in the Budget in Brief (Statement VIA). It is not clear why they are not included. It may be because PDB’s payments are only implicitly 17 Table 15. PDB Outstanding Debt as of end-FY2008 (in billions of Taka) Long-term debt 65.5 Government loans 42.0 Project loans 29.9 IPP bill 12.1 Foreign loans 23.5 Medium-term debt 7.2 Short-term debt 93.5 Arrears 78.3 Principal arrears 38.7 Government 3.4 Foreign loans 35.4 Interest arrears 39.6 Government 31.7 Foreign loans 7.8 Current portion of long-term debt 4.4 Government loans 1.1 Foreign loans 3.3 Accounts payble 9.1 Other short-term liabilities 1.7 Total /1 166.1 Memorandum item Bank loans /2 19.7 Sources: PDB Annual Report (2008) and Bangladesh Economic Review 2008. 1/ As reported in PDB’s balance sheet. 2/ As reported in the Economic Review. 46. PDB is severely indebted and has over time accumulated a significant amount of debt service overdues. According to PDB’s balance sheet as of end-FY2008, the stock of PDB’s total debt was estimated at Tk. 166 billion, equivalent US$2.4 billion (Table 15). Of this amount, PDB’s liabilities to the central government were over Tk. 78 billion (including arrears of Tk. 36 billion), accounting for 47 percent of the total debt the firm reported in their balance sheet. PDB has arrears on both government loans and foreign loans. 47. Four issues are worth highlighting. First, PDB’s balance sheet does not report debt owed to domestic commercial banks, which according to the Bangladesh Economic Review 2008 stood at Tk. 19.7 billion as on June 30, 2008. Adding this amount to the total debt, as reported in PDB’s balance sheet, yields Tk. 186 billion, about US$2.7 billion or 3.4 percent of GDP. 48. Second, the agency’s debt service liabilities to the government are hugely different depending on the information source. In contrast to what is reported in PDB’s balance sheet, of Tk. 78 billion, the Bangladesh Economic Review 2008 shows the firm’s end-FY2008 debt service liabilities to the government as Tk. 316 billion, including arrears of Tk. 265 billion. The difference between the two guaranteed by the government, or they are explicitly guaranteed but not reported because they constitute as short- term counter guarantees (which the Statement does not cover). 14 This monthly budgetary transfer was introduced in accordance with the World Bank Power Sector Development Policy Credit of 2008. 18 figures is Tk. 238 billion, equivalent to US$3.5 billion (Table 16). The bulk of the difference is attributed to the penalty calculation. Although some of the gap may be explained by the difference in the exchange rate applied to on-lent foreign-currency loans, differences in accounting practice alone cannot possibly explain such a large gap.15 Table 16. PDB Differences in DSL Data as of end-FY2008 (in billions of Taka) PDB AR Econ. Review Difference (a) (b) (b-a) Outstanding principal 42.0 51.1 9.0 Project loans 29.9 51.1 21.2 IPP loans 12.1 0 -12.1 Arrears /1 36.2 264.8 228.6 Total /1 78.3 315.9 237.6 Sources: PDB Annual Report (2008) and Bangladesh Economic Review 2008. 1/ Including the current portion of long-term loans. 49. Third, the treatment of the government’s monthly transfers to PDB is different between the two bodies (Table 16). On the one hand, PDB’s financial statements treat the monthly receipts as borrowings from the government ear-marked for IPP bills (Tk. 12 billion).16 On the other hand, the government does not count such transfers as loans to PDB and hence does not include the total sum as part of PDB’s debt service liabilities; neither does it report the transfers as current grants/subsidies in the Bangladesh Economic Review 2008 (Table 9.2, p. 121).17 It is not clear how these transfers are recorded in the government’s book. 50. Finally, the exact nature of arrears on foreign loans (Tk. 46.5 billion or US$678 million) is unclear. Given PDB’s status as a public sector organization, one would have expected the government to take over PDB’s debt service bills before allowing arrears to accumulate, even if they were not guaranteed ex ante. 3.5 Fiscal Transfers to PDB 51. The bulk of PDB’s net losses have been financed by budgetary transfers, and to a small extent, through foreign grants, foreign loans, the accumulation of payables to constructors and suppliers. 52. Transfers from the government have taken various forms. As explicit transfers, the government has provided grants, equity capital and loans (including on-lending), in addition to ADP capital transfers. Part of the explicit transfers is the monthly budgetary support from the government ear-marked for the payment of IPP bills. Implicit fiscal assistance has included the conversion of loans and interest into equity (de facto debt forgiveness), build-up of debt service overdues; and foregone dividend and 15 Foreign-currency debt stocks may be valued at the exchange rate prevailing at the time of disbursement, or converted to local currency terms at the time of reporting at the then prevailing exchange rate. In countries where there are large exchange rate movements over time, like in Bangladesh, differences in accounting practices pose a major problem. 16 It is treated as “cash loans” in the list of government loans, provided in Auditors Report and Accounts (2008), Annex Note 21. 17 For example, these loans are not included in Debt Service Liability (DSL) Accounts and Guidelines (up to FY2008-2009), published by the Ministry of Finance. 19 corporate tax payments. Subsidized fuels for power generation as well as build-up of payables to suppliers and bank overdrafts, if from the public sector, have constituted quasi-fiscal assistance. 53. Estimates suggest that during FY2008 total fiscal and quasi-fiscal assistance to PDB amounted to at least Tk. 99.6 billion (Table 17), about US$1.5 billion or 1.8 percent of GDP.18 Of this amount, Tk. 17 billion was provided as explicit transfers, mostly in the form of monthly transfers to pay the IPP bills and capital transfers. Equity injections and current grants/subsidies were limited. As implicit transfers, PDB benefited Tk. 3.6 billion by accumulating debt service arrears, including the current portion of debt service liabilities to the government that had not been declared as arrears. There was no ex-post conversion of loans to equity during FY2008. Table 17. Estimated Fiscal Transfers to PDB in FY2008 (in billions of Taka) Explicit transfer 17.2 Grants 0.1 Government loans 8.7 Government loans - project (net) 0.6 Government loans - IPP bills (net) /1 8.1 Equity injection 1.5 ADP (capital transfer) 6.9 Implicit transfer /1 3.6 Accumulation of principal arrears 0.6 Accumulation of interest arrears 1.9 Accumulation of over-dues 1.1 Quasi-fiscal transfer 78.8 Fuel subsidy /2 75.9 Bank loans (net) 2.9 Total 99.6 In percent of GDP 1.8% Source: Author’s calculation. See text. 1/ Monthly budgetary supports ear-marked for IPP bills. 2/ See Table 13. 54. Quasi-fiscal transfers to PDB were significant, estimated at Tk. 78.8 billion. Of this amount, fuel subsidies amounted to Tk. 75.9 billion, while net borrowing from commercial banks, believed to be mostly from state-owned commercial banks, was Tk. 2.9 billion. In the absence of detailed information, it is not possible to estimate the portion of PDB’s payables to the public sector (inter-enterprise arrears). 55. The above estimation was carried out as follows. First, flow figures on explicit fiscal transfers were obtained from the PDB Annual Report (2008), and were reconcilied for consistency using the stock figures as of end-FY2007 and FY2008. As regards implicit transfers, the accumulation of arrears, both for principal and interest portions, and current liabilities was estimated by taking the first order difference of the outstanding debt service liabilities as of end-FY2007 and FY2008, for which information is provided in greater details in Auditor’s Report and Accounts of PDB (2008). As for quasi-fiscal transfers, fuel subsidies were estimated based on the volume of fuels used for power generation, and the wedge between PDB’s purchase price and the international price of furnace oil, diesel and natural gas during FY2008, (Table 13). Provision of credits through the banking sector were calculated by taking the first 18 Complete financial statements are available only for FY2008. 20 order difference of the outstanding stock of bank loans to PDB at end-FY2007 and FY2008, reported in the Bangladesh Economic Review. 4. Bangladesh Petroleum Corporation (BPC) 4.1 Petroleum Sector 56. The petroleum sector in Bangladesh is dominated by Bangladesh Petroleum Corporation (BPC), a statutory organization established by a Presidential Ordinance (Ordinance No. 88, 13/11/1976) for the purposes of importing, refining and processing of crude petroleum, blending of lubricants, exporting and marketing of petroleum products including by-products and lubricants. As a sole importer and distributor of petroleum products, BPC controls the wholesale market as well as the retail market in Bangladesh through its three subsidiaries that are shielded from competition (see below). BPC is also responsible for development and expansion of fuel reserve systems throughout the country. 57. At present, PBC has seven subsidiary companies: a refinery, three oil marketing companies, two blending plants, and an LPG bottling company (Table 18). The position of BPC in relation to these companies is similar to that of a holding company. Table 18. BPC Subsidiary Companies Type of activity Subsidiaries Ownership Refinery Eastern Refinery Ltd. (ERL) 100% BPC 50.35% BPC Padma Oil Company Ltd (POCL) 49.65% Other 70% BPC Oil marketing companies Jamuna Oil Company Ltd (JOCL) 30% Others 70% BPC Meghna Petroleum Lmimite (MPL) 30% Others 59.32% BPC Eastern Lubricants Blenders Ltd (ELBL) 40.68% Others Lube blending plants 50% BPC Standard Asiatic Oil Company Ltd (SAOCL) 50% Private Bottling company LP Gas Ltd (LPB) 100% BPC Source: www.bpc.gov.bd. 4.2 BPC’s Operation 58. Over the past five years, BPC imported 3.3-3.8 million tons of petroleum products a year including about 1.2 million tons of crude oil to meet the country's demand, mainly from Saudi Arabia, Kuwait, United Arab Emirates, India and Malaysia, at a cost between US$1.5 and US$3 billion ( 59. Table 19). 21 Table 19. BPC Imports of Petroleum Products (volume) (in millions of metric tons, unless otherwise indicated) FY05 FY06 FY07 FY08 FY09 Crude oil 1,063 1,253 1,211 1,242 861 JP1, Kerosene, Petrol, Octane, Diesel 2,692 2,381 2,536 2,228 2,508 Total imports 3,755 3,634 3,747 3,470 3,369 Total imports (value, in mln. of US dollar) 1,541 1,955 2,172 2,992 2,090 Source: Bangladesh Economic Review 2009. 60. Imported crude oil is refined by Eastern Refinery Limited (ERL) into 17 different kinds of products, mainly high speed diesel, kerosene, fuel oil, petrol and octane, and some special non-fuel products. Some of the ERL products are produced only on demand. The refinery has the capacity of refining 1.5 million tons of crude oil per year. Refined oils produced by ERL meet domestic demand for most of the petroleum products of the country, except for diesel, kerosene and JP-1 (Jet Propulsion-1), and to a small extent octane and petrol. These products are imported as finished products to supplement the deficit. See Table 20 for product-wise sales of petroleum products in FY2009. BPC exports a small amount of naphtha produced by ERL. Table 20. BPC Domestic Sales by Products in FY2009 (in thousands of metric tons) ERL Production Imported refined Total 1/ products Diesel (HSD) 291.5 2,010.0 2,301.5 Kerosene (SKO) 190.7 152.0 342.7 Petrol (MS) & Octane (HOBC) 118.6 75.0 193.6 Fuel oil (FOHS) 134.5 30.0 164.5 Jet A-1 13.8 240.0 253.8 Bitumen 24.9 0.0 24.9 LPG 10.6 0.0 10.6 Other 20.0 0.0 20.0 Total 804.6 2,507.0 3,311.6 Source: Author’s calculation based on the information available on www.bpc.gov.bd. 1/ ERL production was derived as a residual from the total volume of domestic sales and volume imported during FY2009, ignoring BPC’s opening/closing stock of the year. 22 4.2 Tariff Analysis 61. Wholesale and retail prices of Figure 5. Retail Fuel Price (Tk/liter) petroleum products are set by the regulator, BERC. With the rapid increase in Kerosene international oil prices, the domestic retail Diesel prices of diesel, kerosene, petrol and octane Petrol Octane were adjusted upwards several times during the 2000s, but by less than a full extent, against the concern that passing through of large price increases would cause adverse social and political impacts (Figure 5). Information on retail prices of other products, such as LPG and furnace oil, and wholesale prices is not available. 62. Following the crash in global oil prices, the retail prices of four main Source: World Bank data. petroleum products were slashed in October 2008, and again in January 2009. The latter came as a follow-up step to implement the Awami League government’s election pledge. Currently, the retail price per liter is Tk. 44 (US$0.64) for diesel and kerosene, Tk. 74 (US$1.08) for petrol and Tk. 77 (US$1.12) for octane. 63. Retail prices include VAT of 15 percent, as well as other duties charged on imported products, such as customs and supplementary duties, and infrastructure development surcharges. According to the customs schedule downloaded from the Bangladesh Customs’ website, the statutory rate of import duty is 37.5 percent for all imported petroleum products except for lubricating oils, for which the duty is 25 percent.19 64. Bangladesh’s retail prices of petroleum products are amongst the lowest in the region (Table 21). There are concerns that the large price differences have encouraged widespread smuggling of petroleum products in the border states of India. Table 21. Comparison of Regional Petroleum Retail Prices (March 2008) (Taka/liter) Bangladesh India (Kolkata) Pakistan Sri Lanka Nepal Diesel 40.00 56.97 48.15 47.67 59.72 Kerosene 40.00 15.77 45.22 43.22 54.35 Petrol 65.00 79.80 68.53 74.36 84.93 Octane 67.00 82.31 81.58 76.27 - Source: Bangladesh Public Expenditure and Institutional Review (2010) Table 4-5. 19 http://www.nbr-bd.org/nbrweb/CustomsFiles/cusTariff.asp. 23 4.4 Financial Performance 65. Information regarding BPC’s financial performance is generally difficult to obtain. The company’s website presents no financial information, except for its past contributions of VAT and duties to the national budget, and some trade activities. While partial and provisional financial statements of more recent years are available, the complete financial statements obtained for the analysis are of FY2006. The analysis provided below should therefore be interpreted with caution, as it is based on dated, fragmented and generally not very reliable information. 66. Data obtained from the Monitoring Cell suggest that BPC recorded a sizable net loss every year throughout the entire 2000s. One major contributor to BPC’s poor financial performance is said to be the non-economic retail prices of petroleum products that are set below the firm’s cost recovery level. As is evident from Table 22, the firm’s financial position has deteriorated significantly during the past years in parallel with the rise in global oil prices. In particular, BPC incurred a huge net loss of nearly Tk. 70 billion (1.3 percent of GDP) in FY2008, when international oil prices hit a record high level. Once global commodity prices plunged at the onset of the global financial crisis, the firm’s losses shrank sharply in FY2009. Table 22. BPC Income Statement (in billions of Taka) /1 FY05 FY06 FY07 FY08 FY09 Operating profit/loss -26.0 -27.3 -28.2 -65.8 -3.1 Net profit/loss -29.0 -32.4 -32.3 -69.9 -9.4 Source: Monitoring Cell. 1/ BPC’s income statements report the equity injection of Tk. 6 billion and Tk. 7 billion in FY2007 and FY2008, respectively, as a subsidy, which artificially compresses the firm’s net loss of the year. The government does not record these as subsidies. 67. BPC collects VAT on fuel oils that are included in the retail prices, and channels the collection to the national budget together with duties on crude and refined oils it imports. The firm’s annual contribution to the national coffer has been about Tk. 25-30 billion a year (Table 23). Being a chronically loss making company, BPC has made no corporate income tax and dividend payments to the government for quite some time. Table 23. BPC Contribution to National Budget (in billions of Taka) FY05 FY06 FY07 FY08 FY09 Contribution to budget 24.6 26.2 26.3 30.2 27.9 Sources: www.bpc.gov.bd and Bangladesh Economic Review (various issues) 68. Analysis based on the Auditors Report on the Accounts of BPC (2006) suggests that the firm’s cost price per unit of domestically sold products, estimated on a cost-plus basis, was Tk. 33.40 in FY2006, compared with the effective retail price of Tk. 29.42, estimated from domestic sales revenue and the volume of sales (Table 24). This means that, on average, BPC made a loss of Tk. 3.97 (US¢6) for every unit of petroleum products it sold on the domestic market during the year.20 The overall loss from the subsidized fuel sales was estimated at over Tk. 17 billion (Tk. 3.97*4,373 million units) in FY2006, accounting for 64 percent of the firm’s total operating loss of the year. 20 Due to the lack of information on the wholesale prices and volume sold on the wholesale market, it is assumed that all domestic demand for petroleum products was met through retail sales. 24 Table 24. BPC Cost Build-up in FY2006 (in millions of Taka unless otherwise indicated) Total costs 146,039 Cost of sales /1 139,055 Employee expenses 31 Administrative expenses 22 Selling & distribution expenses /2 565 Depreciation 3 Financing charges 6,363 Revenue requirement before export income (a) 146,039 Volume of domestic sales (mln. unit) (b) 4,373 Domestic cost price per unit (Taka) (a/b) /3 33.40 Source: Author’s calculation based on Auditors Reports on the Account of BPC (2006). 1/ Includes import costs of fuel oils and refining/processing costs. 2/ Includes maintenance, insurance and export expenses. 3/ One unit is a liter for all products except for LPG and bitumen. For the latter two, a metric ton is used as a unit. 69. Analysis based on product-wise import data—available only for diesel, kerosene, and petrol and octane for FY2009 and FY2010—suggests that BPC made losses mainly through sales of imported diesel and kerosene. Part of such losses is compensated for through the sales of other products, indicating there is some cross-subsidization between products (Table 25). In FY2009 (FY2010), for example, while BPC made a loss of Tk. 23.5 billion (Tk. 37 billion) through the sale of under-priced diesel and kerosene, a profit of Tk. 3 billion (Tk. 2 billion) was generated through the sale of motor oils. In other words, the firm made a net loss of Tk. 20 billion in FY2009 (Tk. 35 billion in FY2010) through the sales of these four products alone. In the absence of further information, it is not possible to know the full extent of cross-subsidization between products. Neither is it possible to estimate the cost difference between products imported from overseas and produced domestically by ERL.21 21 However, it is safe to assume that the cost price of domestically refined petroleum products is lower. Otherwise, it makes no economic sense to import more expensive finished products. If we assume that it takes US¢10 to refine crude oil to produce a liter of petrol (typical refining cost in the US), then the cost price of petrol produced by ERL would have been around Tk. 47.6 per liter in FY2009, including VAT, which is coincidentally identical to the administered retail price of diesel and kerosene. 25 Table 25. BPC Estimated Loss from Administered Pricing System (in Taka per liter, unless otherwise indicated) FY2009 FY2010 /3 Import Import Admin. Admin. parity price Profit parity price Profit price /1 price /2 /2 Diesel 47.6 51.2 -9.2 44.0 53.1 -14.9 Kerosene 47.6 52.2 -10.3 44.0 51.2 -12.8 Profit (mln. Taka) /4 -23,483 -37,305 Petrol/octane 79.3 48.9 30.4 75.5 59.2 16.3 Profit (mln. Taka) /4 3,160 2,227 Source: Author’s calculation based on the import data taken from www.bpc.gov.bd. 1/ Simple period average of retail price for FY2009. 2/ Import parity price per liter is estimated by applying VAT (15 percent) and import duties (37.5 percent) over the C&F import price per liter, calculated from the volume and value of each product imported. For simplicity, no dealer margin and no distribution and marketing cost is assumed in the estimates. 3/ FY2010 import data are estimates. 4/ Derived by multiplying loss per liter by volume of diesel, kerosene and petrol/octane imported. 70. BPC’s financial difficulties have been intensified further by a sizable amount of accounts receivable. At the end of FY2006, the firm’s receivables totaled to Tk. 34.7 billion, equivalent to 31 percent of its sales revenue of the year. The agent’s subsidiary firms, in particular, Padma Oil Company (one of BPC’s oil marketing companies), were responsible for the bulk of BPC’s receivables in FY2006 (Table 26). 71. Faced with serious liquidity problems, BPC too has accumulated a large amount of payables. As of end-FY2006, its total payables were estimated at Tk. 30 billion (Table 27). Of this amount, payables to the suppliers were relatively small, and the large part was attributed to import expenses, such as cost of freight/transport, river/port dues, and handling commissions. Considering that these services are typically provided by other public corporations, it is likely that BPC’s payables with respect to import expenses consititutes cross-enterprise arrears. No further information is available. Table 26. BPC Accounts Receivable at end-FY2006 Table 27. BPC Accounts Payable as of end-FY2006 (in millions of Taka) (in millions of Taka) Trade related /1 33,228 Suppliers 3,453 * Eastern Refinery (ERL) 742 Kuwait Petroleum 2,069 * Padma Oil (POCL) 20,926 Bangladesh Gas Field 58 * Jamuna Oil (JOCL) 6,136 Petrobangla 1,325 * Meghana Petroleum (MPL) 4,714 Others 26,662 * Standard Asiatic Oil (SAOCL) 208 Import expenses 19,034 * Petrobangla 107 Export expenses 73 Trafigura 205 Import differential 91 B. P. Singapore 186 Companies current account 5,808 Others (trade) 4 Trade VAT payable 1,656 Non-trade related /2 1,447 Others 1 Total 34,675 Total 30,115 Source: Auditors Report on the Accounts of BPC (2006). Source: Auditors Reports on the Accountsof BPC (2006). 1/ Firms with asterisk are NFPCs. 2/ Project current account and sundry debtors. 26 72. According to the provisional balance sheet for the year ending in June 2008, BPC’s total liabilities stood at Tk. 234 billion at year-end (Table 28). Debt owed to the central government was estimated at slightly over Tk. 50 billion, which included Tk. 48.7 billion of the Treasury Bonds the government issued to domestic banks (totaling Tk. 88.3 billion) in FY2006 and FY2008, when assuming the firm’s accumulated liabilities (Table 29). No arrears on long-term loans are reported. BPC’s balance sheets present no information about loans from domestic banks other than bank overdrafts, although the Bangladesh Economic Review 2008 shows an estimated amount of Tk. 85 billion. Table 28. BPC Outstanding Debt as of end-FY2008 (in billions of Taka) Long-term 50.2 Government loans 1.1 Bonds payable to government 48.7 Payable for government for shares vested in BPC 0.3 Pre-liberation dues 0.1 Short-term 183.8 Short-term loans from IsDB 31.1 Accounts payable 42.1 Accrued expenses 2.4 Bank overdrafts 107.1 Income tax payable 1.1 Total /1 234.0 Memorandum item: Bank loans /2 85.2 Sources: BPC provisional balance sheet (2008) and Bangladesh Economic Review 2008. 1/ As reported in the balance sheet. 2/ As reported in the Economic Review 2008. Table 29. Government Bond Issue for the Take-over of BPC’s liabilities (in billions of Taka) Year of issue Name of Security Amount FY06 3-year Sonali Bank Treasury Bond -2009 10.00 FY08 2-year & 3-year BPC Treasury Bond 18.00 FY08 BPC Treasury Bond (5-year and above) 55.27 Total 83.27 Source: Bangladesh Bank Annual Report (2006, 2008), Annex Table-XIV. 73. A distinct feature of BPC’s debt structure is the sizable amount of short-term liabilities, in particular, large bank overdrafts, of Tk. 107 billion, from Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank, all of which are nationalized commercial banks. Detailed information is available only for FY2006 and is presented in Table 30. It is not entirely clear how BPC has accumulated such large overdrafts. Neither, is it clear if the overdrafts attract any penalty. Short-term loans from the Islamic Development Bank (IsDB) are a revolving credit facility for the importation of oil. BPC also has an income tax payable to the government, of Tk. 1.1 billion. Given BPC’s chronic loss position, this liability must have been incurred a long time ago and carried over since then. 27 Table 30. BPC Outstanding Bank Overdrafts at end-FY2006 (in billions of Taka) Sonali Bank 44.9 Janata Bank 30.8 Agrani Bank 11.6 Rupali Bank 2.1 Total 89.5 Source: Auditors Report on the Accounts of BPC (2006). 74. As before, data on BPC’s debt to the central government differ significantly depending on the source. According to BPC’s provisional balance sheet for FY2008, the firm’s total liabilities to the government stood at Tk. 50 billion at end-FY2008, whereas the Bangladesh Economic Review 2008 reports them as Tk. 1.8 billion, including arrears of Tk. 1.7 billion (Table 31). Table 31. BPC Debt Owed to Central Government at end-FY2008 (in billions of Taka) BPC B/S Econ. Difference (a) /1 Review (b) (b-a) Principal outstanding 50.1 0.1 -50.0 Government loans 1.1 0.1 -1.0 Bonds payable to government 48.7 0 -48.7 Payable to gov. for shares vested in BPC 0.3 0 -0.3 Arrears 0 1.7 1.7 Principal arrears 0 1.1 1.1 Interest arrears 0 0.6 0.6 Total 50.1 1.8 -48.3 Sources: BPC provisional balance sheet (2008) and Bangladesh Economic Review 2008. 1/ Balance sheet does not indicate the existence of arrears. 75. The bulk of this difference, of Tk. 48 billion, can be explained by the treatment of BPC’s bank loans that were repaid by the central government through a bond issue in FY2006 and FY2008. While BPC records them as long-term liabilities to the government (i.e., creditors changed from banks to the government), the government does not record them as BPC’s debt service liabilities to the central government. That is, the government treats it as a pure take-over of liabilities. The exact terms of the take-over are not available, and questions remain as to why BPC records only Tk. 48.7 billion, rather than the full face value of the Treasury bonds, of Tk. 83 billion as payables to the central government in their book. 4.5 Fiscal Transfers to BPC 76. Estimates suggest that fiscal and quasi-fiscal transfers to BPC reached at least Tk. 51 billion (US$743 million) during FY2008, the year when the firm made a record loss of Tk. 70 billion (Table 32). Explicit fiscal transfers to BPC were a small part of the total amount, accounting for only 26 percent. Explicit transfers were provided mostly in the form of equity injections and capital transfers. 28 Table 32. Estimated Fiscal Transfers to BPC (in billions of Taka) FY06 FY07 FY08 Direct transfer 4.1 12.0 13.5 Government grant 0.0 0.0 0.0 Government loans (net) 0.0 -0.1 0.0 Equity injection 0.0 6.0 7.0 ADP (capital transfer) 4.1 6.1 6.5 Implicit transfer 10.0 0.0 73.3 Take-over of debt owed to NCBs /1 10.0 0.0 73.3 Quasi-fiscal transfer /2 129.4 10.9 -35.8 Accumulation of overdraft from NCBs 46.2 0.2 17.4 Bank loans (net) 83.2 10.7 -53.2 Total 143.4 22.9 51.0 Source: Author’s calculation based on Bangladesh Economic Review (various issues), Bangladesh Bank Annual Report (various issues), and BPC balance sheets. 1/ See Table 29. 2/ Excludes accumulation of payables associated with importation (possible inter-enterprise arrears). 77. The bulk of the fiscal assistance to BPC was provided through implicit and quasi-fiscal transfers. The government’s take-over of BPC’s domestic bank loans through the issuance of Treasury bonds constituted an implicit fiscal transfer of Tk. 73 billon in FY2008, whereas the accumulation of overdrafts from state-owned commercial banks, in the amount of Tk. 17.4 billion, can be regarded as a quasi-fiscal transfer to BPC. Due to the lack of information, it is not possible to estimate input subsidies to BPC through other NFPCs, in particular, through subsidized gas from Petrobangla and electricity from PDB, another kind of quasi-fiscal transfer to the firm. 78. Most of the information necessary for the estimation was sourced from the Bangladesh Economic Review and Bangladesh Bank Annual Report, in light of the weaknesses in BPC’s financial statements in general. The amount of new government borrowing (net) was calculated taking the first order difference of the outstanding principals, as reported in the Bangladesh Economic Review. Since data on BPC’s arrears, presented in the Economic Review, appear to have a break in series, implicit fiscal transfers through the accumulation of arrears cannot be calculated in the same manner, and are excluded from this analysis. Information regarding the government’s take-over of bank loans was obtained from Table XIV (government borrowing from the banking system) of the Bangladesh Bank Annual Report (2006 and 2008). Accumulation of bank overdrafts was derived from the stock data, presented in BPC’s provisional balance sheet (2008). Similarly, new bank borrowing (net) were calculated from the stock data reported in the Bangladesh Economic Review. 5. Fiscal Implication of New Power Purchase Agreements 5.1 New Power Purchase Agreements 79. Bangladesh is currently facing 1,500-2,000 MW of power shortages during the peak hours.22 The resulting frequent load shedding is having serious impacts on every sphere of life and production in factories and fields. Sensitivity and severity of the present power shortages are unprecedented, as 22 This is a margine that will take years to narrow. Bangladesh achieved only about 4,000 MW effective generation capacities in 39 years since independence (103 MW per year). If expansion of power generation was to progress at the same pace, it would take about 14 years to add new generation capacity of 1,500 MW. 29 illustrated by the draconian measures the government adopted in recent months to deal with them. In March 2010, as emergency measures, the government halted supplies of gas to three major fertilizer- manufacturing plants, diverting gas to power plans to help increase electricity generation, and imposed restrictions on the use of air-conditioners in private homes. The ongoing power shortages are indeed a major challenge for the Awami League government, as a potential source of political instability. 80. In a bid to boost power supplies in the imemdiate short run, the government recently signed several contracts to purchase power from private companies that are planning to build temporary power stations. All these plants are powered by diesel and furnace oil, and are expected to add around 1,300 MW of electricity to the national grid during the course of FY2011.23 The expected timing of which construction of each plant is completed is provided in the Road Map, published recently by the Ministry of Finance.24 However, it remains to be seen if the construction of these plants will progress as expected, since reportedly some of these private companies that won the contract has never been in the business of power generation. 81. A number of observers have raised serious concerns about the fiscal implication of the new power contracts. Each purchase agreement sets out an agreed wholesale tariff at which PDB purchases electricity from the private company. Sources report that the wholesale price of power will range between Tk. 7.66 and Tk. 13.66 per kWh, far above the existing tariffs approved by BERC (Table 9).25 While the government is considering tariff adjustments over the next two to three years, a full pass- through of the high wholesale price is unlikely for now. A significantly higher loss of PDB appears unavoidable at least during FY2011. 82. There are additional concerns if BPC has to import more refined products to meet the growing demand from the new oil-fired power plants, as this would certainly raise BPC’s loss. Information is mixed. While one source says that the private companies will have to source (unsubsidized) fuels by themselves on the internatioanl market, others report that BPC will make imported diesel and furnace oil available to them at subsidized price. If the latter is the case, then the country’s ammual demand of fuel oils would shoot up from annual 3.5 million tons to around 4.5 million tons in FY2011.26 Here again, unless the domestic price of these oils is adjusted to the import parity level, BPC is bound to make a larger loss in FY2011, particularly now that global oil prices are at more elevated levels than during the past two years. 5.2 Fiscal Implication of New Power Purchase Agreements 83. What follows attempts to estimate the potential fiscal costs associated with the new power purchase agreements. In the absence of detailed information on the new contracts, the results presented below should be taken only as rough estimates. 23 In the meantime the government is looking into ways to import liquefied natural gas to improve gas supplies, but the lack of infrastructure, such as a re-gasification unit, will make this a difficult problem to solve. In the long term the government hopes to construct two nuclear power plants with the assistance of Russia’s atomic energy corporation, Rosatom. It is not clear how Bangladesh is going to fund the construction of these plants, which are likely to cost US$1.5billion each to build. 24 Towards Revamping Power and Energy Sector: A Road Map , June 2010, available at www.mof.gov.bd. 25 See for example, “Power tariff to go up”, The Daily Star, May 14, 2010. 26 See for example, “Bangladesh fuel import bills to up by BDT 5,000cr nest FY”, Energy Bangla, April 19, 2010. 30 Impact on PDB’s Financial Position 84. Scenario analysis suggests that, in the absence of retail tariff adjustments, PDB could suffer a net loss of between Tk. 36 and Tk. 116 billion during FY2011 (compared with Tk. 9 billino in FY2009), depending on the volume of electricity added to the national grid during the year, and wholesale tariff of electricity purchased by PDB. The results presented in Table 33 can be interpreted as follows. The estimated PDB’s loss during FY2011 would be Tk. 36.4 billion if (i) 500 MW of 1,300 MW of additional electricity expected to be available during the year does actually become available to be sent to the national grid; and (ii) if the weighted average price of 500 MW of power PDB purchases is Tk. 8.0 per kWh. If all the expected additional energy was to be available from July 1, 2010, at the average purhcase price of Tk. 12 per kWh, then PDB’s net loss could amount to Tk. 116 billion for FY2011. If the bulk of PDB’s loss is to be covered by fiscal transfers, the implication on the budget is significant. Table 33. PDB Estimated Net Loss in FY2011: No Tariff Adjustment /1 (in billions of Taka) Wholesale Tariff for PDB (Tk/kWh) MW 8.0 9.0 10.0 11.0 12.0 500 36.4 40.8 45.2 49.6 54.0 700 45.0 51.2 57.3 63.4 69.6 900 53.6 61.5 69.4 77.3 85.2 1,100 62.2 71.9 81.5 91.2 100.8 1,300 70.8 82.2 93.6 105.0 116.0 Source: Author’s calculation. 1/ Assumes weighted average tariff of Tk. 2.68 per kWh. Net losses were projected based on PDB's cost structure and energy generation efficiency in FY2009, adjusted for domestic price changes (period average), and assumed to be 7.8 percent for FY2010 and 7.0 percent for FY2011. For simplicity, the estimates do not include additional wheeling charges PDB will have to pay as a result of new power purchase agreements. 85. If the tariff schedule is to be revised upwards, say by 15 percent, effective on July 1, 2010, then the estimated PDB’s loss for the year would decline slighly to Tk. 27-107 billion (see Table 34). Still the potential fiscal resources needed to keep the operation of PDB would be significant, suggesting that piecemeal tariff adjustments alone are unlikely to mitigate PDB’s financial burden significantly. Table 34. PDB Estimated Net Loss in FY2011: 15% Higher Tariff (in billions of Taka) Wholesale Tariff for PDB (Tk/kWh) MW 8.0 9.0 10.0 11.0 12.0 500 26.6 31.0 35.4 39.7 44.1 700 35.2 41.3 47.5 53.6 59.7 900 43.8 51.9 59.6 67.5 75.3 1,100 52.4 62.0 71.7 81.3 90.9 1,300 61.0 72.4 83.8 95.2 106.6 Source: Author’s calculation. 31 Impacts on BPC’s Financial Position 86. If BPC is to import more petroleum products, in particular, diesel and furnace oil, to respond to the growing demand from the new power plants, the firm’s fuel import bill could rise from US$2.2 billion in FY2010 to US$2.5-3.4 billion in FY2011 (an increase of 13-55 percent), depending on the developments of international commodity marets and the growth in domestic demand. With the projected crude oil price of US$81.4 per barrel by the World Bank, BPC’s import bill would likely to be around US$2.6-3 billion during FY2011. See Table 35, which can be interpreted as before. Table 35. BPC: Estimated Fuel Import Bill for FY2011 (in billions of US dollars) International Crude Oil Price (US$/barrel) MW 75.0 80.0 85.0 90.0 95.0 500 2.5 2.6 2.8 3.0 3.1 700 2.5 2.7 2.9 3.0 3.2 900 2.6 2.8 2.9 3.1 3.3 1,100 2.6 2.8 3.0 3.2 3.3 1,300 2.7 2.9 3.0 3.2 3.4 Source: Author’s calculation. 87. In the absence of price information for furnace oil, it is not possible to estimate the potential scale of loss BPC could make by supplying imported fuels to the new power plants. Rough estimates suggest, however, that BPC’s loss from domestic sale of diesel alone could reach Tk. 50 billion, although part of this loss would be compensated for by the sale of other products, such as petrol and octane. 88. To sum up, the series of power purchase agreements signed lately is likely to place a huge strain on public finances. In the absence of any price adjustments, PDB—and BPC if it will have to import more oils—would face a serious liquidity problem, and require a significant amount of fiscal resources to continue its core business. Regardless of how resources are transferred—be they explicit, implicit or quasi-fiscal transfer—the cost of the new agreements would eventually need to be taken care of by the government. Besides these fiscal costs, broader economic cost associated with the inefficient NFPCs would be further aggravated. 6. Conclusion 89. This paper has reviewed the financial performance of non-financial public corporations (NFPCs) in Bangladesh, with a specific focus on the two major loss-making firms, Bangladesh Petroleum Corporation (BPC) and Power Development Board (PDB). 90. Based on the existing information within the Bank, available mostly on the public domain, the study finds the following:  Peformance of the NFPC sector as a whole has been unsatisfactorty. However, once four chronically loss-making enterprises are excluded, one finds improving performance of the rest of the sector. Since FY2003, the SOE sector excluding the four enterprises has been reporting a growing consolidated net profit, although this achievement needs to be discounted in light of various fiscal transfers. 32  There has been a significant amount of resource transfers to the NFPC sector every year through explicit, implicit and quasi-fiscal means. In FY2008, at least Tk. 378 billion (US$5.5 billion, or 7 percent of GDP) was provided to the sector. PDB and BPC absorbed the bulk of this amount.  The large resource transfers to the loss-making enterprises represent a considerable fiscal drain, constraining resource availability for high-priority needs such as infrastucture investment. Besides direct fiscal costs, there are broader economic costs of inefficient NFPCs in terms of lost growth opportunities and unemployment.  These fiscal transfers are not recorded in a systematic, transparent manner. There are significant information gaps in the NFPC sector in Bangladesh. Information gaps exist both at the enterprise and government levels, and available data are generally of poor quality.  One of the main factors behind the poor financial performance of PDB and BPC is the low administered price set for the goods and services they render, which are below the cost recovery levels. By distoring the energy prices, Bangladesh is discouraging to conserve energy and seek more efficient energy sources. The non-economic electricity tariffs are also discouraging investment or participation of private sector in electricity generation. In the petroleum sector, very low petrol prices are encouraging widespread smuggling in the border states of India. With the recent liberalization of petroleum products in India, concerns about smuggling are even more elevated.  The newly signed power purchase deals are likely to put a further strain on the public finances in the years to come, unless bold measures are taken. Piecemeal and ad hoc tariff adjustments alone are unlikely to address PDB’s financial viability in a sustainable manner. The next phase of the study could expand the scope of the analysis in the following areas:  Fiscal implications of subsidized fertilizer and gas, provided by Bangladesh Chemical Industries Corporation (BCBI) and Petrobangla (or BOGMC). While these firms are not reporting losses, it is believed that significantly under-prised fertilizer and natural gas are incurring large opportunity costs to the government.  Institutional framework for managing NFPCs and their perofmrnacne. Whare are the roles of the Ministry of Finance, line ministries and Bangladesh Bank?  Analysis on the previous reform and privatization efforts.  Non-financial aspects of NFPC performance, in particular, broader economic costs associated with the mismanagement of NFPCs, including unemployment and lost growth opportunities through foregone resources, which could otherwise have been available for more productive purposes, such as infrastructure investment.  Forward looking analysis of fiscal risks emanating from the NFPC sector. 33 Non -Financial Public Enterprise Economic Classification of Estimates For the Year 2008 - 2009 ( Revised Data ) Sabre Corp. HO/ Opertg. P GS Value Empls Dep & oth Optg. Net Non- WP Sub- Intrest Direct Divi- Ret. Net prof. Govt. Cap. Exp. Code Name ENT Added Comp'n NC Item Surplus Op. Incom PF sidy Tax dend Income after tax saving Fin. Reqd. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Manufacturing 100 BTMC HO 625 1061 -436 418 48 -902 0 0 0 0 0 0 -902 -902 -853 54 907 100 BTMC ENT 2171 938 1233 994 273 -34 10 0 0 1213 0 0 -1237 -1237 -964 170 1134 1200 BJMC HO 1388 611 777 888 16 -127 0 0 0 0 0 0 -127 -127 -111 141 252 1200 BJMC ENT 56794 35217 21577 31627 4982 -15031 168 0 0 8684 0 0 -23548 -23548 -18566 1334 19900 200 BSEC HO 765 406 358 485 54 -181 0 0 0 0 0 100 -281 -181 -227 269 496 200 BSEC ENT 81838 71237 10601 5251 673 4677 1536 271 0 1359 1430 1884 1268 3152 1941 1878 -63 300 BSFIC HO 4941 3757 1184 1033 151 0 0 0 0 0 0 0 0 0 151 37 -114 Appendix 300 BSFIC ENT 36389 36903 -514 16400 1342 -18257 4776 122 0 7542 0 0 -21145 -21145 -19803 2487 22290 400 BCIC HO 3123 1400 1723 1603 120 0 0 0 0 0 0 0 0 0 120 780 660 400 BCIC ENT 301527 205221 96306 21510 37896 36900 6507 2278 0 11506 18104 0 11519 11519 49415 34540 -14874 600 BFIDC HO 1486 257 1229 318 30 881 0 0 0 0 0 0 881 881 911 179 -732 600 BFIDC ENT 15764 10293 5471 3400 332 1740 5 63 0 413 507 40 721 761 1053 2167 1114 Sub Total 506811 367301 139509 83927 45917 9666 13002 2734 0 30717 20041 2024 -32851 -30827 13067 44036 30970 are presented in lakh. Electricity, Gas,& water 3100 PDB ENT 634211 664135 -29924 25350 78383 -133657 5346 150 0 26457 0 0 -154918 -154918 -76535 173754 250288 3101 DESA ENT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3300 CWASA ENT 4056 2338 1718 1432 527 -241 927 0 0 214 64 50 358 408 885 819 -67 3400 DWASA ENT 42324 21771 20553 9805 7000 3748 3954 0 0 1174 200 300 6028 6328 13028 36963 23936 900 BOGMC HO 44932 42581 2351 1207 225 919 0 0 0 0 0 27500 -26581 919 -26356 641 26997 900 BOGMC ENT 227942 21656 206286 14964 31288 160034 22512 8537 0 3271 64027 27536 79175 106711 110464 57282 -53182 Sub Total 953465 752481 200984 52758 117423 30803 32739 8687 0 31116 64291 55386 -95938 -40552 21486 269459 247972 Transport & Communication 2100 BSC ENT 32254 26727 5528 883 1615 3030 333 0 0 0 162 300 2901 3201 4516 45052 40537 2200 BIWTC ENT 16308 8365 7942 5288 1018 1636 1614 0 50 898 0 500 1903 2403 2921 4860 1939 2400 CPA ENT 107000 37708 69292 8843 9500 50949 3667 0 0 0 20000 5000 29615 34615 39115 83877 44762 2401 CDWMB ENT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2500 MPA ENT 2712 2077 635 3272 1000 -3637 2577 0 0 0 230 0 -1290 -1290 -290 1682 1972 2501 MDWMB ENT 0 28 -28 142 56 -225 21 0 0 0 0 0 -204 -204 -149 0 149 2510 BLPA HO 2342 1778 564 165 363 36 0 0 0 0 0 50 -14 36 349 1378 1029 2600 BIMAN ENT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2800 BRTC ENT 12034 7488 4546 2492 3137 -1083 359 0 0 1290 0 0 -2014 -2014 1123 1306 183 2900 JMBA HO 27565 12277 15287 294 0 14993 0 0 0 0 0 600 14393 14993 14393 661 -13732 Sub Total 200215 96448 103766 21379 16689 65699 8571 0 50 2188 20392 6450 45290 51740 61978 138816 76839 34 Commercial 1000 BPC ENT 2008380 2038755 -30374 437 21 -30832 4812 0 0 67578 0 0 -93598 -93598 -93578 3866 97444 1010 BPC ENT 2152619 2131380 21239 11052 3521 6667 7572 569 0 2793 3798 3473 3605 7078 7125 9663 2538 1300 BJC ENT 0 145 -145 274 6 -425 550 0 0 0 0 0 125 125 131 0 -131 1500 TCB ENT 32315 34775 -2460 715 56 -3231 900 0 0 0 0 0 -2331 -2331 -2275 559 2834 Sub Total 4193314 4205055 -11740 12478 3604 -27821 13834 569 0 70371 3798 3473 -92199 -88726 -88597 14088 102685 Agriculture & Fisheries 700 BFDC HO 280 370 -89 160 1 -251 0 0 0 0 0 0 -251 -251 -249 208 457 700 BFDC ENT 2021 852 1168 509 129 531 -316 0 0 0 1 10 204 214 333 329 -3 800 BADC HO 16155 5071 11084 12827 -769 -974 0 0 0 0 0 0 -974 -974 -1743 324 2067 Sub Total 18456 6293 12163 13496 -639 -694 -316 0 0 0 1 10 -1021 -1011 -1659 861 2521 Construction Sector 3500 CDA HO 20751 2458 18294 553 75 17666 0 0 0 0 0 109 17558 17666 17632 11866 -5767 3600 RAJUK HO 9219 1244 7975 1186 300 6489 0 0 0 0 0 300 6189 6489 6489 30207 23718 3700 KDA HO 1446 411 1035 289 134 613 0 0 0 0 0 40 573 613 706 771 65 3800 RDA HO 1308 1129 179 138 27 13 0 0 0 0 0 15 -2 13 26 505 479 Sub Total 32724 5242 27483 2166 536 24781 0 0 0 0 0 464 24318 24781 24853 43349 18495 Service Sector 1100 BFDC(FILM) ENT 2585 1831 754 544 248 -38 179 0 0 131 0 10 0 10 248 190 -58 1400 BFFWT HO 5024 4750 274 607 5 -338 0 0 0 0 0 0 -338 -338 -333 5 338 1400 BFFWT ENT 10971 9997 974 600 228 147 111 7 0 55 0 99 96 195 324 3021 2697 1700 BTB HO 1354 449 905 451 27 427 0 0 0 0 0 10 417 427 444 127 -318 2300 BIWTA HO 16169 8608 7562 6388 1980 -807 0 0 0 0 0 0 -807 -807 1173 10659 9486 2700 BPRC ENT 3490 2136 1355 686 202 467 -449 0 0 60 0 10 -53 -43 149 1657 1508 3000 BWDB HO 58014 45075 12939 12868 0 71 0 0 0 0 0 0 71 71 71 71 0 3001 DD ENT 3522 2064 1458 791 65 603 -7 0 0 0 0 0 596 596 661 322 -339 3002 ME ENT 1690 969 721 554 92 75 0 0 0 0 0 0 75 75 166 28 -139 3200 REB HO 29273 5262 24011 3175 274 20563 0 0 0 0 0 500 20063 20563 20336 90547 70210 3201 PBS ENT 333544 263369 70175 32712 36112 1351 27214 0 800 24559 0 0 4806 4806 40918 82307 41389 500 BSCIC HO 5017 1858 3159 3418 61 -321 0 0 0 0 0 0 -321 -321 -260 8369 8629 The table presented below is the information on NFPCs maintained by the Monitoring Cell, titled Non- 6600 EPZA HO 18628 2270 16358 1725 4295 10338 0 0 0 0 0 700 9638 10338 13933 17272 3339 7600 CAAB ENT 26255 15804 10451 6444 5600 -1594 6135 0 0 642 0 2500 1398 3898 6998 23885 16887 financial Public Enterprise Economic Classification of Estimates for the year 2008-09 (revised). Figures 7700 BHB HO 878 154 724 724 0 0 0 0 0 0 0 0 0 0 0 0 0 7800 BSB HO 905 130 775 775 0 0 0 0 0 0 0 0 0 0 0 673 673 7801 BSB ENT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 8000 EPB ENT 2517 1686 830 561 16 254 173 0 0 0 0 0 427 427 443 260 -183 6004 BTRC HO 254768 4943 249825 225 0 249600 0 0 0 0 0 0 249600 249600 249600 2959 -246641 Sub Total 774604 371355 403250 73248 49205 280798 33356 7 800 25447 0 3829 285668 289497 334871 242352 -92522 Grand Total 6679589 5804175 875415 259452 232735 383232 101186 11997 850 159839 108523 71636 133267 204902 365999 752961 386960 Non - Financial Public Enterprise Economic Classification of Estimates For the Year 2008 - 2009 ( Revised Data ) Sabre Corp. HO/ Equity L.Term Loan Finance Assumd Assumed Equity L.Term Current Total Net Fix Other L.T.Curr. Assets Personnel Code Name ENT Injection Borrow Repay Deficit Assets St.Credit Liabilitis Liabilitis Fund Assets Assets Stock Others Strength 1 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Manufacturing 100 BTMC HO 0 1872 0 -964 970.00 6.00 42686 191388 132373 366446 1945 236499 0 128002 197 100 BTMC ENT 0 0 389 1523 548.05 2071.05 -34761 11542 33754 10536 3228 1279 178 5851 4503 1200 BJMC HO 0 0 0 252 -114.65 137.35 -127 342786 104852 447511 272 380722 0 66516 327 1200 BJMC ENT 0 69034 42541 -6593 5723.1 -869.90 -186166 254611 167713 236157 172384 820 16089 46865 30124 200 BSEC HO 0 492 0 4 236.50 240.50 24448 124441 4884 153773 1605 138934 0 13234 178 200 BSEC ENT 0 137 519 319 7368.63 7687.63 34207 42549 38884 115640 33490 14951 18774 48425 2388 300 BSFIC HO 12 0 0 -126 15165.56 15039.56 9641 21903 59547 91091 2078 29748 0 59265 345 300 BSFIC ENT 2487 1526 1526 19803 5727.4 25530.40 -116008 67661 130878 82532 10608 8922 26952 36049 15966 400 BCIC HO 0 150 0 510 0 510.00 376830 413117 39740 829687 3668 688321 0 137697 580 400 BCIC ENT 0 0 9818 -5056 28794.4 23738.40 178690 463670 107129 749489 382397 50353 97341 219397 9888 600 BFIDC HO 350 0 0 -1082 1235.7 153.70 2681 3661 12011 18353 726 3838 0 13788 172 600 BFIDC ENT 0 0 284 1398 2771.31 4169.31 -1502 19957 20223 38678 6302 1891 4633 25852 5345 Sub Total 2849 73211 55077 9988 68426 78414 330619 1957286 851988 3139893 618703 1556278 163967 800941 70013 Electricity,Gas,Water 3100 PDB ENT 68510 87318 46634 141095 83986.3 225081.30 1108493 878999 1093363 3080855 1650135 506871 84523 839326 13602 3101 DESA ENT 0 0 0 0 0 0.00 0 0 0 0 0 0 0 0 0 3300 CWASA ENT 0 0 384 317 1359.31 1676.31 6180 8481 11194 25855 10816 86 3712 11240 629 3400 DWASA ENT 26043 0 1506 -602 5629.86 5027.86 546092 40984 8846 595921 462853 71140 4584 57344 3751 900 BOGMC HO 0 0 35792 62789 919 63708.00 24891 -33836 169213 160268 3425 905 0 155938 562 900 BOGMC ENT 1825 1726 14144 -42589 0 -42589.00 0 0 0 0 0 0 0 0 6948 Sub Total 96378 89044 98460 161010 91894.47 252904.47 1685656 894628 1282616 3862899 2127229 579002 92819 1063848 25492 Transport & communication 2100 BSC ENT 0 42000 739 -725 2885.9 2160.90 25953 52558 11853 90364 57335 1284 2571 29174 272 2200 BIWTC ENT 0 0 2333 4272 762.64 5034.64 35496 18706 22748 76951 39844 28718 3821 4568 3349 2400 CPA ENT 0 0 0 44762 5527.12 50289.12 482561 17488 99407 599455 161222 377435 239 60559 5731 2401 CDWMB ENT 0 0 0 0 0 0.00 0 0 0 0 0 0 0 0 0 2500 MPA ENT 663 0 0 1309 3057.61 4366.61 44886 0 11890 56776 21950 1193 1187 32447 1490 2501 MDWMB ENT 0 0 0 149 100.59 249.59 1228 21 559 1808 526 176 4 1102 101 2510 BLPA HO 500 0 255 784 953.93 1737.93 5717 1040 1964 8720 2345 4166 0 2210 78 2600 BIMAN ENT 0 0 0 0 0 0.00 0 0 0 0 0 0 0 0 0 2800 BRTC ENT 0 0 2486 2669 164.65 2833.65 -28236 20992 27493 20250 17901 537 540 1271 2252 2900 JMBA HO 0 0 10167 -3565 4334.91 769.91 166200 213392 7553 387145 301302 10669 0 75174 122 Sub Total 1163 42000 15980 49655 17787.35 67442.35 733805 324197 183467 1241469 602425 424178 8362 206505 13395 Commercial 35 1000 BPC ENT 0 451100 638154 284498 40936.81 325434.81 -350851 611898 775590 1036637 2180 584152 48940 401365 116 1010 BPC ENT 0 0 694 3232 49042.52 52274.52 57982 12361 509234 579577 22610 17499 148550 390918 2721 1300 BJC ENT 0 0 0 -131 829.86 698.86 -137988 141867 5433 9312 183 0 0 9128 198 1500 TCB ENT 0 38 250 3046 1183.45 4229.45 9424 -212 5119 14331 1233 80 0 13018 191 Sub Total 0 451138 639098 290645 91992.64 382637.64 -421433 765914 1295376 1639857 26206 601731 197490 814429 3226 Agriculture & Fisheries 700 BFDC HO 0 0 0 457 -234.7 222.30 -1793 3745 22118 24070 234 7 0 23829 100 700 BFDC ENT 0 120 25 -98 2353.38 2255.38 3406 4730 25578 33714 7816 11 211 25676 389 800 BADC HO 0 0 0 2067 -19509.4 -17442.40 -38510 145 20861 -17504 2355 0 0 -19859 5946 Sub Total 0 120 25 2426 -17390.72 -14964.72 -36897 8620 68557 40280 10405 18 211 29646 6435 Construction Sector 3500 CDA HO 0 0 0 -5767 29453.49 23686.49 21882 0 24096 45977 1858 12605 0 31515 410 3600 RAJUK HO 36250 0 0 -12533 41239 28706.00 319274 0 34146 353420 3651 121609 0 228160 694 3700 KDA HO 672 0 0 -607 1749.04 1142.04 16915 0 1021 17935 6230 766 0 10939 231 3800 RDA HO 15 0 0 464 1025.07 1489.07 10790 69 1335 12194 36 9482 0 2676 106 Sub Total 36937 0 0 -18443 73466.6 55023.6 368861 69 60598 429526 11775 144462 0 273290 1441 Service Sector 1100 BFDC(FILM)ENT 0 0 80 22 448.26 470.26 3320 2015 3777 9113 2278 1905 339 4592 409 1400 BFFWT HO 0 0 0 338 -196.43 141.57 3465 477 4171 8113 30 0 0 8084 252 1400 BFFWT ENT 2956 202 0 -460 384.06 -75.94 5994 1307 4163 11464 4218 3021 1269 2955 546 1700 BTB HO 0 0 0 -318 288.87 -29.13 3190 0 -10 3180 776 1738 0 666 248 2300 BIWTA HO 4796 5143 450 -3 8727.27 8724.27 7046 49293 40592 96931 41130 38437 0 17364 4213 2700 BPRC ENT 725 0 343 1125 321.26 1446.26 4284 827 2642 7753 3441 779 885 2648 730 3000 BWDB HO 0 0 0 0 721 721.00 1347369 630133 386270 2363772 714475 362100 0 1287196 7342 3001 DD ENT 0 0 0 -339 332.86 -6.14 14252 0 495 14747 11086 0 2129 1532 941 3002 ME ENT 0 0 0 -139 235.48 96.48 3051 658 343 4051 1461 0 442 2148 271 3200 REB HO 38525 53498 12615 -9197 113778.77 104581.77 861278 492878 32928 1387084 8918 1093310 0 284856 953 3201 PBS ENT 0 91937 27288 -23260 46535.4 23275.40 123311 1000864 384126 1508301 896650 99761 70531 441359 26140 500 BSCIC HO 4001 4522 374 480 8343.73 8823.73 29000 46064 4253 79316 30196 42989 0 6132 1644 6600 EPZA HO 0 0 1131 4470 5507.37 9977.37 69971 48539 12252 130761 48528 26 0 82207 938 7600 CAAB ENT 0 0 3299 20186 10293.95 30479.95 217453 53020 35230 305703 168440 24030 2069 111165 3404 7700 BHB HO 0 0 0 0 0 0.00 0 0 0 0 0 0 0 0 360 7800 BSB HO 1507 0 0 -835 1568.54 733.54 21128 2011 871 24009 2132 19895 0 1982 429 7801 BSB ENT 0 0 0 0 0 0.00 0 0 0 0 0 0 0 0 0 8000 EPB ENT 0 0 0 -183 468.61 285.61 10109 0 31 10140 4986 0 0 5155 251 6004 BTRC HO 2959 0 0 -249600 252558.91 2958.91 0 0 0 0 0 0 0 0 117 Sub Total 55469 155302 45580 -257713 450317.91 192604.91 2724221 2328086 912134 5964438 1938745 1687991 77664 2260041 49188 Grand Total 192796 810815 854220 237568 776494.25 1014062.3 5384832 6278800 4654736 16318362 5335488 4993660 540513 5448700 169190 Page 3 of 4 18/06/09 References Auditors Report and Accounts of Bangladesh Power Development Board for the Year Ended June 30, 2008 (partial). Auditors Rerpot on the Accounts of Bangladesh Petroleum Corporation for the Year Ended 30th June, 2006. Bangladesh Bank Annual Report 2006-2007. Bangladesh Bank Annual Report 2007-2008. Bangladesh Bank Annual Report 2008-2009. Bangladesh Economic Review (2008). Bangladesh Economic Review (2009). Bangladesh Economic Review (2010, forthcoming) Bangladesh Energy Regulatory Commission Electricity Distribution Tariff Regulation (2008). Bangladesh Power Development Board Annual Report 2007-2008. Bangladesh Power Development Board Annual Report 2008-2009. Budget in Brief, 2008-09. Budget in Brief, 2009-10. Daily Star (2010). “Power tariff to go up”, May 14, 2010. Debt Service Liability (DSL) Accounts and Guidelines (up to FY2008-2009), Finance Division, Minsitry of Finance. Energy Bangla (2010). “BPC fuel oil import bills to up by BDT 5,000cr next FY”, April 19, 2010. Towards Revamping Power and Energy Sector: A Road Map (2010). Finance Division, Ministry of Finance, Government of the People’s Republic of Bangladesh, June 2010. World Bank (2010). Bangladesh Public Expenditure and Institutional Review (draft). World Bank (2009). Implementation Completion and Results Report on Power Sector Development Policy, Report no. CIR00001098, September 2009. 36