Central bank lifts loan cap for oil-based power projects

The Bangladesh Bank has exempted oil-based power-producing companies from the single borrower exposure limit to keep the flow of money uninterrupted in the energy sector required to facilitate power generation.

For the import of fuel oil and other raw materials for power generation, a bank can lend over 25% of its capital to any single person, organisation, or group of power producers till 31 December this year, according to the central bank circular, signed by Abu Farah Md Nasser, deputy governor of Bangladesh Bank on Thursday.

The central bank will determine the upper limit.

Earlier in November last year, coal-based power-producing companies were given this opportunity for five years.

Sources at the central bank said the decision has been made so that electricity generation is not interrupted amid the volatility in oil and gas prices in the global market, but experts in the banking sector have said that giving loans in this manner may harm the financial health of banks.

According to the power division, the production cost of oil-based electricity is the highest among various energy-based power sources such as oil, gas, and coal.

Of these, the production cost of diesel-powered power plants is even higher, on an average Tk22-25.

The Bangladesh Independent Power Producers Association, a forum of private sector power producers, has recently presented the proposal at a stakeholders' meeting at the Power Division, where it said the use of furnace oil-based plants can be increased from 40% to 66% this year.