Bangladesh on Thursday banned the import of new oil-fired turn-key electricity generators, citing foreign exchange worries and reversing a policy to allow independent power producers to setup mini plants to meet chronic power shortages.
Bangladesh had planned to host 49 so-called quick rental power plants, mostly fuel-oil powered generating units shipped into the country ready to run, by the end of next year to help cover a daily electricity demand shortfall of 1,500 megawatts (MW).
But the energy adviser to Prime Minister Sheikh Hasina said that no more new oil-generating units can be imported.
"The government will not allow more oil-fired power plants on a quick rental basis to ease pressure on foreign exchange reserves and also make the Bangladeshi taka stronger against the U.S. currency," Tawfiq-e-Elahi Chowdhury told Reuters.
Saiful Islam, a director of state-run Bangladesh Power Development Board, said the government had so far approved 18 quick rental power plants, mainly fired by fuel oil.
Chowdhury said Bangladesh's economy was under pressure because the oil imported to run the plants had drastically increased demand for dollars.
Soaring import costs and weaker demand for exports such as textiles have weakened the taka 15 percent against the dollar in 2011.
Bangladesh's foreign exchange reserves fell nearly 10 percent to $9.38 billion at the end of January compared with $10.38 billion in the same month in previous year and hit a record $11.32 billion in April last year.
Bangladesh will spend $6.17 billion on importing oil in the 2011-12 fiscal year, more than double the previous year.
Muhammed Aziz Khan, chairman of Summit, a leading independent power producer, said it was time for the country to diversify fuel sources.
"At the moment we have enough oil-fired power plants that add up to 40 percent of electricity generated in the country," Khan told Reuters, adding the government should allow dual-use power plants that can also run on fuels produced domestically like coal and natural gas.