5 rental power deals deviate from rules

One power deal being cancelled; other projects delayed

The power board’s move to have five rental power projects totalling 340 megawatt capacity within this year looks bleak as the contractual obligations are now being deviated from, according to documents obtained by The Daily Star.

Local companies Rahimafrooz, Otobi and Coastal Saba were awarded contracts to set up diesel-based and furnace oil-based rental power projects for three to five years. Now they either want to change power plant equipment configuration or have not submitted performance security deposit (PSD) or have deferred the PSD payment.

All of these are severe violations of contractual terms for which the Power Development Board (PDB) can terminate their contracts.

According to correspondence with PDB, Rahimafrooz attributed the cause of deviation to the Board’s delay in completing the tender process. On the other hand, both Otobi and Coastal Saba argued unless the power plant equipment is changed from the proposed one, it will give rise to technical problems.

There appears to be a lack of seriousness in implementing these projects. In fact, one of them has expressed inability to sign one contract involving a 30mw plant, which is now facing cancellation, says a PDB source.

The cabinet purchase committee approved these five projects in mid-January hoping that the diesel-based plants would come into operation by May-June and furnace oil-based plants from October-November.

These companies were supposed to sign contracts with PDB within January 27. But the bid winners were delaying signing of the agreements requesting PDB to shift their signing of agreements which the Board ultimately had to do.

Sources say these companies never had complete power plant equipment ready to be installed within the contract period. Rental power companies are supposed to own equipment ready to be installed any time, and not procure them after winning a contract.

“After winning the bids, the contractors are now buying equipment. But it appears they can’t find the equipment quoted in the bid documents, which is a clear deviation,” says an official.

Rahimafrooz bagged a 30MW power project in Jamalpur for five years and was supposed to sign the contract on February 7. Insiders say it has expressed inability to sign the contract and PDB has taken move to encash bid bond against this project.

The same company signed its contract for the Thakurgaon 50MW diesel-fired project for three years on February 4 and deposited PSD worth Tk 22 crore on February 17.

The same day, it wrote to PDB about changing its diesel engine generator. The company wrote that in the tender schedule it had quoted use of heavy-duty diesel plant consisting 35 units of Caterpillar diesel generator.

But due to delay in tender process, the company could not secure these units. Instead, it has secured 41 units of Mitsubishi equipment.

On February 11, Rahimafrooz wrote that it has selected a route for an underground power line from its switchyard to the designated substation of the Power Grid Company of Bangladesh. The company then went on saying if PDB did not approve laying of this cable by February 14, they cannot be held responsible for Thakurgaon project implementation delay. February 12 and 13 were weekly holidays.

Otobi won Bheramara 100MW diesel and Noapara 100MW furnace oil projects and signed the contracts on February 4. The company was supposed to submit its PSD for both the projects within its deadline of February 18, which it did not.

Otobi came up with its PSD for the Bheramara project on February 22, four days after expiry of deadline. PDB, however, accepted it.

For the Noapara project, Otobi submitted PSD on February 25 under its newly-formed company Quantum.

On February 9, it wrote to PDB that originally it had proposed to build the plant as a combined cycle one, but instead it wanted to build it with “reciprocating engines with co-generation facility”.

The company argued that the Noapara plant “probably will not run at base load and this has given rise to some concerns as to the constituent of plant machinery and equipment”. It added if the plant is not set to run with base load mode, frequent start-stoppage with combined cycle system will pose problems from technical and economic points of view. That is why the company is proposing the configuration change.

But Otobi did not mention anything about how such configuration change could affect other aspects of power generation from this plant like changes in the machine heat rate configuration efficiency or if extra land would be required.

However, PDB recommended to the power ministry that Otobi’s request for change be accepted.

Coastal Saba, the company that was awarded 50MW furnace oil-based plant in Barisal delayed signing of the agreement. While other bidders signed the agreements on February 4, it signed the same on February 15.

On February 16, Coastal Saba wrote to PDB that it wanted to change its power plant configuration to operate with “reciprocating engines under a co-generation” system instead of setting up a combined cycle system as was promised during the bid.

Like Otobi, Coastal Saba said if this plant does not operate as a “base load” plant, it will create technical and financial problems.

“All of these violations are serious in nature. Unfortunately, PDB has become hostage to the situation due to persisting power crisis,” quips an official.

The PDB had originally planned to sign agreements for eight rental power projects totalling 530 mw within early December with a view to ensuring extra power supply during the Boro irrigation period from early March.

But external influence over PDB’s selection process and hectic lobbying by various influential business lobbies slowed down the tender process. The government ultimately picked the bids of some local companies that had no prior experience to install and operate rental power projects.

On delay of submission of PSD against the Otobi projects, a company source said it was caused by error of the bank issuing the PSD.

On the question of changing the configuration of power plant equipment after signing of the contract, a top executive of a power company requesting not to be named said it would not affect power generation.

“The heat rate of the plant will remain unchanged and no additional land would be required for the change. Besides, everyone else did it,” he said.

editorial

How good is good enough?

How can their security be guaranteed? Photo: Shafiq Islam/ Drik NewsShahedul Anam Khan

Governance has been characterised as exercise of power and making decisions by a group which, in a democratic dispensation, happens to be the elected government. It is omnipresent in all segments of the society and the welfare of a community depends on the choices made by the people granted this authority. There are various actors who, by virtue of the position they hold, arrogate to themselves the power to govern.

Security in its comprehensive sense is premised on three factors: one is the traditional security emerging from statist discourse, but security of the people that can also come from economic progress and good governance and rule of law; these three things, working together, are really what determine security.

One of the views that was forcefully articulated at a seminar on “Good Governance and National Security” recently was that it was well nigh impossible to attain an ideal state of good governance and as such we should be satisfied with the second best option, that is “good enough governance” rather than trying to attain the ideal state.

The fact that there is an inextricable link between security and good governance, since bad governance or failure to govern properly will inevitably adversely impact the wellbeing of the people, and in turn the security of the state, it will be risky to accept anything less than good governance.

And if we go for the second best the question is how much of “enough” will be good enough for the government to deliver to its people. One feels that although the position, that one will not be able to achieve the maximum, might be a realistic view given the centrifugal forces acting on all the agents of change, one would like to ask who will determine as to what is the optimum level.

Governance issues predominate our existence today. It is a catch phrase for our development partners. For the developing countries, anything and everything that is donor driven has to fulfill the criterion of good governance. In fact, the idea has reached such a phenomenal proportion that tomes have been written to define what good governance is.

The IFIs, the UN and EU have spent considerable effort and time to secure the assurances of the developing countries to understand their formulation and explication of the term “good governance” as well as to undertake such measures as would ensure that those conditions are fulfilled, to qualify for aid. And why not, those that provide money for various development programs would want to know how well that is being utilised. And that is crux of the issue — doing it well — is a function of good governance.

Leaving aside the developing countries, good governance is an enabling condition, which claims universality in application irrespective of the level of development, and which enables governments to ensure that quality of life of its people which would rule out the possibility of unrest and violence. That in turn would ensure peace and security, at least in so far as the internal manifestation is concerned.

It must be emphasised that good governance is not entirely about wielding power. Neither, by the same token, is there a direct correlation between economic strength and security. But interestingly all the definitions propounded by the international institutions and other scholarly studies converge on the term as referring to a process by which power is exercised.

There are many examples in recent times where lack of good governance has resulted in terrible consequences for the state. To quote Chris Patten, of the seven states, out of the top ten that appear in the list of states facing the greatest risk of failure, are in Africa, and all have come to this state due entirely to the consequence of bad governance.

Security is inseparable from good governance, since good governance helps prevent conflicts and ensure peace. The link had been spelled out more than 200 years ago by Kant who said: “People who feel secure and free, governed by the rule of law and not of men, are much less likely to go to war with each other — either within or across borders — than those who don’t.” And while looking at security we forget all too often that at times the state can itself be a cause of its insecurity.

Even the lone superpower, the USA, has been constrained to acknowledge the predominant role of good governance in conflict resolution when the US national security advisor admitted very recently that the solution of the Afghan crisis lay not in military victories but in delivering to the people their basic needs through a regime of good governance.

Looking at the matter in a more down-to-earth manner, good governance is in fact good management that would ensure security of the people; and if people are secure so will be the state. Thus, it will never do to be satisfied with the second best. The aspiration should be to strive for absolutely good governance that fulfills all the universally accepted criteria.

Brigadier General Shahedul Anam Khan, ndc, psc (Retd) is Editor, Defence & Strategic Affairs, The Daily Star.