VZCZCXRO8867
RR RUEHCI
DE RUEHKA #1143/01 0650951
ZNR UUUUU ZZH
R 060951Z MAR 06
FM AMEMBASSY DHAKA
TO RUEHC/SECSTATE WASHDC 5806
INFO RUEHLM/AMEMBASSY COLOMBO 7335
RUEHIL/AMEMBASSY ISLAMABAD 1001
RUEHKT/AMEMBASSY KATHMANDU 8419
RUEHNE/AMEMBASSY NEW DELHI 8930
RUEHLO/AMEMBASSY LONDON 1394
RUEHCI/AMCONSUL CALCUTTA
RUEHRC/USDA FAS WASHDC
RUCPDOC/USDOC WASHDC 1585

UNCLAS SECTION 01 OF 02 DHAKA 001143 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
NEW DELHI FOR FAS 
 
E.O. 12958: N/A 
TAGS: ENRG PGOV EAGR BG
SUBJECT: BDG CONFRONTED BY FAILURE TO INVEST IN POWER SECTOR 
 
 
Sensitive but unclassified. 
 
¶1.    (SBU)  Summary:  The chronic electricity shortage in 
Bangladesh has turned acute this winter.  Steady economic 
growth and the corresponding growth in electricity demand 
have begun to overwhelm the country's aging generating 
capacity.  "Load shedding" (controlled blackouts) occurs more 
regularly and for longer periods, affecting not only the 
rural areas, but also Dhaka, Chittagong and other major 
cities.  The power shortage is also affecting water supplies 
and will cause reduced yields for the season's boro rice 
crop, much of which depends on electric pump driven 
irrigation during the winter dry season.  With no obvious 
short term solutions at head, this "energy crisis" could 
become a major election issue for the opposition Awami 
League.  End summary. 
 
¶2.    (SBU)  The annual winter shortage of electricity is 
again making local headlines.  Increased demand for 
electricity for irrigation pumps for the winter boro rice 
crops, coupled with scheduled generator outages for 
maintenance during the cool, winter dry season, typically 
results in increased load shedding during this time of year. 
This year's energy deficit, however, has begun earlier and 
been more severe than in years past. 
 
¶3.    (SBU)  Bangladesh has approximately 4000 MW of 
installed electricity generating capacity, excluding captive 
power generation dedicated to major industrial plants.  Total 
demand, however is estimated at 5000 MW, leaving a 20% 
shortfall.  Steady economic growth averaging 5.5% annually, 
coupled with even stronger growth in the industrial, 
manufacturing and commercial construction sectors, has 
resulted in an average 10% annual growth of electricity 
demand. 
 
¶4.    (SBU)  Despite election promises to match supply to 
demand, the present BNP-led government has failed to bring 
new generating capacity on line.  A planned coal fired 250-MW 
Chinese-built plant is over a year behind schedule, while 
work is yet to begin on 450-MW plant at Menaghat II.  The 
government has stalled a similar 450-MW plant at Serajganj 
for years because of investors' ties to the Awami League. 
The 80-MW Chinese-built Tongi power plant, which the Prime 
Minister proudly commissioned in September 2005, failed just 
three days later and has not operated for any significant 
period since then.  An estimated 40% (1600 MW) of existing 
capacity is nearly 25 years old.  Poor maintenance and the 
age of the plants contribute to frequent equipment failures, 
further reducing available supply. 
 
¶5.    (SBU)  At least three additional private investor 
proposed projects for over 1000 MW of generating capacity 
have been tied up in negations for more than a year. 
Although part of the delay reflects legitimate questions 
about the projects, lack of government technical capacity, 
fragmentation of authority among government corporations, the 
energy ministry and the prime minister's office, inadequate 
government procurement regulations, and political infighting 
are the underlying structural barriers to investment. 
Government attempts to stimulate investment in the small 
power sector (plants generating 50-150 MW of power) became so 
mired in blatant corruption that the World Bank was forced to 
step in and stop the government from proceeding until a new 
procurement law could be adopted. 
 
¶6.    (SBU)  Regular load shedding is impacting economic 
activities.  Many businesses are now closing earlier because 
of load shedding during the peak evening business hours (six 
to eight pm), which is the period of peak energy demand in 
Bangladesh.  Load shedding also shuts down equipment at 
manufacturing and industrial plants, often ruining production 
runs.  Even when power is restored, firms face significant 
delays bringing heavy manufacturing equipment back on line 
and restarting production processes.  Although some larger 
firms have gone off the grid with their own captive power 
plants, most others must rely on diesel fueled standby 
generators, the reason why Bangladesh is Caterpillar's 
largest overseas market for diesel generators. 
 
¶7.    (SBU)  Load shedding has also had a major impact on the 
water supply in Dhaka and Chittagong.  Water for these cities 
 
DHAKA 00001143  002 OF 002 
 
 
mainly comes from several hundred deep tube wells.  Water is 
extracted using electric pumps.  Only half the wells have 
standby diesel generators to supply power to the pumps during 
blackouts.  Increased use of generators and rising fuel 
prices are straining the budgets of city water authorities. 
Moreover, erratic power makes it more difficult for the water 
authorities to maintain any pressure in the mains, which 
sometimes run dry.  Wastewater infiltration into the poorly 
maintained water distribution system may lead to an increase 
in water-borne diseases. 
 
¶8.    (SBU)  The power shortage will also affect the winter 
boro rice crop.  An estimated 30-40% of the land under 
cultivation requires irrigation.  Pumps are used to supply 
the water; however, load shedding during much of the day 
prevents farmers from using their pumps.  Voltage spikes and 
brownouts also reduce significantly the useful life of the 
pumps. 
 
¶9.    (SBU)  The problem is especially acute in the 
northwestern corner of Bangladesh, where 55% of the boro rice 
crop is grown.   Half of this land requires irrigation.  Yet 
this region has little local generating capacity because 
there are no major gas lines in the area to fuel the power 
plants.  Power comes mainly from the northeastern region, 
where gas service for the power plants is readily available. 
Transmission lines between the two regions are insufficient 
to meet demand, one reason load shedding falls more heavily 
on the northwestern region. 
 
¶10.   (SBU)  Farmers have also had to cope with fertilizer 
shortages and price rises.  Poor distribution and informal 
cartel behavior by local dealers to drive up prices, rather 
than supply shortages, are the key factors behind the 
shortages.  Faced with these problems, farmers have reduced 
the acreage under cultivation by up to 15%.   Average yields 
however may fall by only 10%, as good weather in the east 
leads to higher crop yields, offsetting lower yields in the 
west. 
 
¶11.   (SBU)  The Awami League has been slow to capitalize on 
the power crises.  It has made the requisite statements 
chastising the government for failing to fulfill its election 
promises, has tried to humanize the issue by highlighting the 
plight of students forced to study for exams by candlelight, 
and has staged isolated protests on behalf of farmers.  The 
Awami League has been far more focused, however, on pushing 
its election reform proposals. 
 
¶12.   (SBU)  Comment:  The severity of this year's power 
shortages could become a major issue in the upcoming 
elections.  The Awami League's rural base is clearly 
frustrated by the continual load shedding.  The shortages are 
also having a more noticeable impact on the nearly 20 million 
inhabitants of Dhaka and Chittagong.  Moreover, this year's 
power shortages coincide with shortages of fertilizer and 
diesel fuel, as well as commodity price hikes, gradually 
increasing inflation and embarrassing problems at the 
national airline, BIMAN.  End comment. 
CHAMMAS