End review of Area Coverage Rural Electrification (ACRE) in Bangladesh

The Project

The Norwegian Government has since 1997 supported the Rural Electrification Board (REB) in Bangladesh with NOK 200 million for electrification of two remote entities with small financial means. The grants should cover supply of material to electrification organised through rural cooperatives in Bhola and Gaibandha as parts of the ongoing nation program which Norway has supported from 1993. Substantial support has been given also of other donors.

Interesting Findings

• The two cooperatives have built nearly 3000 km of lines and passed their main goal by connecting more than 65 000 consumers. The collection rate is well above 98%. Low system losses indicate high technical standards and few illegal connections. More than 1/3 of the procurement deals have been made with local suppliers.
• The project completion was in one case delayed by two years and additional Norwegian funding was necessary to replace non-appearing funds from the Government of Bangladesh and other donors. The overall costs were, however, largely as planned.
• In one case the main problem is a long supply line connection to the national grid, which gives sub-standard supply, many interruptions and reduces profitability for the cooperative. The length of the line results in unacceptable voltage drops, low capacity and heavy losses. A result of this is that this line may cause danger for people and livestock during faults.
• A substantial part (approx. 10-15%) of the Norwegian funding remained unused at the end of the project. The consultant recommends that remaining funds to be used for reinforcement of the power supply to the area where the long supply line creates significant problems.
• Both cooperatives struggle with profitability and can not cover interest and repayment of loans. One reason is the lack of generation capacity in Bangladesh which decrease incomes of cooperatives and reduce consumers satisfaction and willingness to pay.
• The review states that the national electrification authority (REB) together with the cooperatives has been, and still is, a (quote) "brilliant role model for utility operation and rural electrification" in comparison to other companies and institutions. The consultants recommend, however, that the relationship between REB and the cooperatives should be considered carefully, giving more freedom and responsibility to the cooperatives.
• The Norwegian funds were project oriented while REB is programme oriented, which makes it impossible to trace how the Norwegian funding has been used. Materials and equipment procured by Norwegian fund were pooled with similar items procured utilizing funds provided by other agencies. More material seems in one case to be bought than needed, with the effect that materials can be transferred to other projects. Independent audition has not covered the total flow of funds as specified in the agreement.
• Problems related to the financial management have remained unsettled years after they are raised instead of having been solved at the beginning of the project.