Rampal coal power project involves a set of risks relating to funding, investment, cost of production, supply of fuel extreme weather events, says the Institute for Energy Economics and Financial Analysis (IEEFA).
Its report released on Friday cautioned that the project, dubbed Bangladesh-India Maitree project, could effectively end up in a financial mess.
“The project is heavily subsidised, exposes investors, taxpayers and consumers to high risk and is a potential stranded asset in the making,” the IEEFA report observed.
The coal-based power plant proposed to be built near the Sundarbans mangrove forest, is a joint venture between India and Bangladesh’s state-owned entities.
The IEEFA examined the project on parameters such as funding, investment, cost of production, supply of fuel as well as risk due to extreme weather events.
“The project fails on all fronts as well as exposes investors to a significant risk,” said Jai Sharda, managing partner at Equitorials and author of the report.
The project will produce electricity that will cost 32% more than the average electricity costs in Bangladesh, despite multiple subsidies from Bangladesh and India, said the report.
It claimed that a below-market-rate loan by Indian EXIM Bank represents a $988 million subsidy effectively paid by Indian taxpayers.
Also, the Bangladesh government is proposing a 15-year income tax exemption for the plant, an exemption worth $936 million. furthermore, Bangladesh would be granting an effective annual $26m subsidy by conducting maintenance dredging to assure coal delivery to the plant, the report added.
It pointed out that EXIM Bank, too, might face of crisis of foreign funding for funding coal-based power plant.
The IEEFA mentioned that building a massive coal power plant near the Sundarbans would spell out disaster for the ecologically sensitive area supporting unique biodiversity.
“Exposure to Rampal project is a clear violation of the Equator principles which puts at risk EXIM Banks ability to raise competitively priced borrowings in the international markets,” said Tim Buckley, director of Energy Finance studies, Australasia for IEEFA.
Source: Prothom Alo
