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IDCOL’s solar power partners seek govt intervention for loan write-off

  • Published at 07:13 pm April 19th, 2021
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IDCOL logo COllected

IDCOL recently forwarded a proposal to the Bangladesh Bank seeking a write-off approval of Tk306.41 crore in default loans

Five of the largest partner organizations of state-owned IDCOL, who played a vital role in expanding the solar home system (SHS) in the country, are now seeking the government’s intervention to resolve the loan write-off issue.

Otherwise, they say, they will be deprived of the benefit and face huge losses.

Official sources said IDCOL recently forwarded a proposal to the Bangladesh Bank seeking a write-off approval of Tk306.41 crore in default loans for its 39 partner organizations. The 44 partner organizations of IDCOL have about Tk1,400 crore in default loans.

They said these loans, provided by IDCOL, became default because of the government’s fast grid power expansion program.

“Grid electricity expanded to the off-grid areas that discouraged SHS consumers to pay back the loans they received from the partner organizations. Such unpaid loans finally made them defaulters in paying back IDCOL,” said a top official of a firm involved in the renewable energy program.

IDCOL had distributed the loan after receiving funds from different donor agencies, including the World Bank.   

According to World Bank’s latest data, an estimated $1,094.93 million was invested in the SHS project to provide electricity to about 20 million people — which means about $266 per household.

Of the investment, 63% came from the World Bank, 14% from the Asian Development Bank and 12% from the Japan International Cooperation Agency (JICA).

The entire fund was distributed by IDCOL as a soft loan which resulted in saving Bangladesh $1,852 million while providing clean energy since 2003, says a recent World Bank survey.

It said the project helped households gain $745 million, partner organisations $310 million and the IDCOL $379 million while the government's net benefit was $474 million, said the donor agency.

Solar industry insiders said the SHS program was launched by IDCOL in 2003. In the last 18 years, over 5.5 million solar home systems have been installed.

They said that there was a tripartite partnership to the financial model under which IDCOL provided about 70% of the total cost of installing the SHS as soft loans to the partner organizations, while the remaining 30% was invested by the organizations and the customers themselves.

After installation, the customer would pay back the entire cost to the POs in three to five years, while the partner organizations would pay back the loans that they took from IDCOL.   

Under this arrangement, officials said, about Tk4,500 crore was provided by IDCOL to the partner organizations and the program was running very well, illuminating the country’s off-grid areas.

“The project was successfully running as the repayment by the POs to IDCOL was excellent,” said a top official of a leading partner organization.

But the SHS program started facing serious setbacks in 2015 with the aggressive and advanced grid-electricity distribution programme, mainly driven by the Rural Elctrification Board (REB).

Officials said as soon as SHS customers receive grid-electricity from REB, most of them uninstalled their solar systems and stopped repaying their loans to the partner organizations.

They said though the BREB had no plan to expand their coverage, local lawmakers would push them for extending the reach to off-grid areas falling under their electoral constituencies. This would often violate the REB commitment to not go into areas where SHS were installed under the IDCOL loan programme.

“The REB move ultimately put the SHS in great trouble,” said a top official of an IDCOL partner organization, declining to be named.

An IDCOL official said the rural power utility's expansion had a large impact on the entire SHS programme, as many partner organizations were forced to write off their debts from households that stopped using SHS.

In that situation, the IDCOL board on November 28 approved a policy that it would consider loan waiver for 39 of the organizations, keeping the large five organizations’ loan waiver for the next phase consideration depending on their performances.

The financial institute also forwarded its proposal to the central bank for approval.

“Due to the IDCOL policy, the largest players in the SHS programme who installed 65 percent of the total number of SHS, become victimised as they will simply not receive the waiver facility,” said an official of a partner organization preferring anonymity.

Seeking the government’s top policymakers’ intervention to resolve the issue, he said it will be absolutely unfair to deprive the top players in the SHS program.

Chairman of Sustainable and Renewable Energy Development Authority (Sreda) Mohammad Alauddin said the issue is yet to come to his office.

“If it comes to Sreda, it’ll try to play its role in resolving the issue as it did over the issue of mini-grid operators,” he told UNB.

Bangladesh Bank’s senior official Julkarnaine, who was dealing with the issue, could not be reached for comments for this article.

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