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The India-Bangladesh Rampal Power Project Is A Waste Of Resources. Here's An Alternative

24/06/2016 8:30 AM IST | Updated 15/07/2016 8:27 AM IST
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Wolfgang Rattay / Reuters
Steam rises from the cooling towers of the coal power plant of RWE, one of Europe's biggest electricity and gas companies in Niederaussem, north-west of Cologne, Germany. Picture taken March 3, 2016. REUTERS/Wolfgang Rattay

In a project that is mired in controversy, India's National Thermal Power Corporation Limited (NTPC) and Bangladesh's Power Development Board are building the Rampal Power Station, which will use coal imported from China, India or Indonesia. Environmentalists have been up in arms against the power plant because of the proximity of its proposed location to the Sundarbans mangrove forest.

The plant, which has been delayed significantly from the original plans of commissioning by 2016, will be very expensive, despite major subsidies from both Bangladesh and India and multi-year lows in coal prices. The plant is set to receive subsidies worth over US$ 3 billion over its life in the form of income tax and operational subsidies from the Bangladeshi government and a soft loan from the Indian government-owned EXIM Bank. Despite this massive subsidy, the cost of electricity produced from the plant will be more than 30% in excess of the average cost of electricity in Bangladesh. This increase is after Bangladesh has already seen rapid increase in power costs over the last five years.

The Rampal plant is part of the Power System Master Plan (PSMP) formulated by Bangladesh in 2010 to add generating capacity to the energy-starved country. The trouble with the plant, though, is that it violates almost all the objectives of the PSMP.

The plant will use outdated supercritical technology, violating the objective to move towards a low-carbon economy.

The technology, as well as the coal that the plant will use, will be imported into Bangladesh, contrary to the objective of the PSMP to develop domestic resources. In addition, it will use outdated supercritical technology, violating the objective to move towards a low-carbon economy. Since the plant is based on subsidies, it is also against the objective to build efficient capacities.

All the major players involved in the development of the Rampal project are Indian government-owned entities. The plant is promoted by the Indian government-owned NTPC Ltd. The loan component of the plant is set to be provided by the Indian EXIM Bank. The main order for the construction of the plant was reported to be given to BHEL, again owned by the Indian government.

Ironically, the Indian government is supporting the development of this coal-fired plant at a time when India itself is moving away from coal-based power. India has made significant progress on its ambitious renewable energy capacity addition program, which targets 175GW of renewable capacity by 2022. Simultaneously, the Indian Power Minister has made it clear that India will minimize its usage of imported coal. Indian coal power plants are operating at an average Plant Load Factor of below 60%.

India's interests would be better served by developing a series of solar power plants in Bangladesh, developed by Indian manufacturers, instead of an expensive coal-based power plant.

The Indian renewable energy program is geared to not only make the country self-sufficient in power, but also to boost the Prime Minister Narendra Modi's ambitious Make-in-India initiative by promoting manufacturing of solar equipment in the country. While there has been substantial progress on the addition of solar capacity, most of the capacity addition is through imported solar equipment. As such, the solar manufacturing capacity in India is still underdeveloped. India's own plans for earmarking some solar development with the Domestic Content Requirement (DCR) clause has had limited success in developing India's domestic solar equipment manufacturing capacity. Incidentally, the DCR clause has been challenged in the World Bank by the United States.

In this context, India's interests would be better served by developing a series of solar power plants in Bangladesh, developed by Indian manufacturers, instead of an expensive coal-based power plant. It would not only align Indian and Bangladeshi interests while achieving the required diversification in energy source for Bangladesh, but also boost Indian solar manufacturing capacity.

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