US embassy cable - 05DHAKA1355

UNCLAS SECTION 01 OF 02 DHAKA 001355 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON, SENV, ENRG, BTIO, BG 
SUBJECT: SIMULTANEOUS WATER, POWER AND GAS SHORTAGES PLAGUE 
BANGLADESH 
 
 
1. Summary: Inadequate utilities - gas, water and electricity 
- routintely plague Bangladesh, but new shortages and 
delivery problems have made the problem particularly acute 
now.  While the shortages should ease in the coming months, 
solutions to the chronic problems have been slow to develop 
and in some cases may bring additional problems.  Failure to 
address these and other infrastructure needs undermines 
growth and development.  End Summary 
 
2. In recent weeks, Bangladesh has experienced a shortage of 
gas, water, and electricity.  An unusually dry March has 
reduced water supplies.  Field maintenance and weaknesses in 
the distribution system have reduced gas supplies and, more 
importantly, gas distribution pressures.  Maintenance 
problems have also prevented many power plants from operating 
at full capacity.  In a situation reminiscent of the 
children's nursery rhyme, for want of adequate gas, the power 
generators can't operate; for want of the power generators, 
the water pumps can't pump.   In short, these critical 
utilities are interdependent such that problems with any one 
utility resonate throughout the system, causing shortages in 
rural and urban areas throughout the country. 
 
3. These shortages are having an immediate impact on 
agriculture and commerce.  Farmers have difficulty irrigating 
the winter rice crop without adequate water and electricity 
to operate the distribution pumps, which is expected to 
adversely affect yields.  Rice prices are rising.  "Load 
shedding" (the local term for planned blackouts) has 
literally left students in the dark as they prepare for 
exams, and disrupts smaller manufacturers without dedicated 
power generation facilities.  To address acute needs, the BDG 
has ordered controversial power diversions from major markets 
and large office and retail complexes during peak hours, 
insisting they use their own captive generators.  Faced with 
rising fuel prices for their generators, operators of Dhaka's 
shopping malls are fighting this order, while offering 
alternative proposals like shutting off half their lights to 
curtail demand or shutting down their shops for one or two 
hours at a time. 
 
4. While acute shortages are creating real hardship, they 
should dissipate in coming months.  Occasional rains are 
occurring more often and the rainy season is expected to 
begin in May.   Unocal has just brought a new gas field on 
line and maintenance work on other fields should be completed 
shortly.  The additional gas will enable power plants to run 
closer to their rated capacities. 
 
5. The government, however, has done little to address the 
chronic weakness of its utility infrastructure.  Faced with a 
generating shortfall of more than 15% of electricity demand, 
the BDG has been slow to authorize new plants despite foreign 
investors ready, willing and able to construct and operate 
new capacity.  The current BDG has yet to add a single new MW 
of generating capacity during its three years in office.  The 
BDG has also reduced its power purchases from independent 
operators due to rising fuel prices, which operators may 
incorporate into the takeoff price paid by the BDG. 
 
6. Economic growth is also putting pressure on gas supplies, 
despite record output in recent days as a result of the new 
Unocal field at Moulavi Bazaar.  Officials at Petrobangla 
estimate a shortfall of 150 million cubic feet per day 
(mmcfd) of gas needed for electric power generation. 
Concerns over gas supplies may also be behind government 
hesitation to authorize new plants, including the planned 
investment by India's Tata group.  BDG officials are 
reportedly very concerned with the ability of Bangladesh to 
meet 20-year supply contracts out of current proven reserves. 
 One BDG official conceded to EconOff that a major overhaul 
of the gas sector would be needed in the next year and a half 
in order to meet demand, although he said little was being 
done. 
 
7. Bangladesh's major cities - Chittagong, Khulna, and Dhaka 
- have suffered from inadequate water supplies and sewage 
treatment for years.  Chittagong's government water supply 
system only meets 30% of the daily demand.  Although the 
Chittagong Water and Sewer Authority (WASA) branch was 
established 43 years ago, there is still no sewer system. 
Khulna suffers from major salinity problems due to seawater 
contamination of surface and ground water.  Dhaka's surface 
water sources are large enough to meet current demand but are 
so polluted that they cannot be used and the cost of 
treatment and decontamination is prohibitive.  Instead, 
Dhaka's water demand is supplied from the local aquifer, but 
exceeds the aquifer's recharge capacity. 
 
8. The Dhaka WASA recently announced plans to develop a 
system of 1000-meter deep tube wells to replace the existing 
450-meter deep wells, many of which have run dry.  While 
meeting the intermediate needs of Dhaka's population, this 
solution will only defer the long-term problem.  Moreover, 
overtaxing the underground aquifer renders Dhaka far more 
vulnerable to major damage in the event of a large 
earthquake.  Seismic disaster experts predict a major 
earthquake along the Himalayan fault line, which runs through 
Bangladesh, sometime in the next ten years. 
 
9. There does not appear to be a grassroots response to these 
shortages among average Bangladeshis.  The opposition Awami 
League party has responded to the shortfalls with organized 
protests demanding adequate supplies of water, power, and 
gas, but the protests have failed to draw support outside of 
party activists.  Businesses and manufacturers have largely 
taken the problems in stride, developing their own solutions 
to chronic problems.  Bangladesh is one of Caterpillar's best 
markets for generators, while larger manufacturing facilities 
often install captive 10-15 MW gas turbine generators to meet 
their own needs.  While solving the immediate problem, these 
ad hoc solutions undermine political pressure for long-term 
solutions to Bangladesh's critical infrastructure needs.  As 
the issue of gas supply for new power plants illustrates, 
however, these chronic problems, if not addressed, will 
adversely affect Bangladesh's medium and long-term growth 
prospects. 
THOMAS