Expanding Access To Electricity In Rural Bangladesh

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Washington, June 25, 2002 – The World Bank today announced the approval of a US$191 million International Development Association (IDA) credit and a US$8 million Global Environment Facility¹ (GEF) grant for the Rural Electrification and Renewable Energy Development Project, that expands access to environmentally-sound energy in remote communities in Bangladesh.

Despite the rapid increase in the expansion of the rural energy network, enabling some 350-400,000 additional households to be connected each year, an estimated 10 million rural households in Bangladesh lack access to electricity.  The absence of reliable power remains a significant barrier to economic development and lasting poverty reduction in Bangladesh.

The Rural Electrification and Renewable Energy Development Project will extend the electricity system to nearly 700,000 remote households and small businesses.  At the core of this expansion effort is a successful partnership between the Rural Electrification Board and the Village Electricity Cooperatives which ensures the efficient and reliable delivery of rural electricity.

The Village Electricity Cooperatives are governed by councils which include elected consumer representatives.  The electricity tariffs are established by the cooperatives themselves under regulatory oversight of the Rural Electrification Board.

“The Rural Electrification Board and the 67 village cooperatives together constitute a successful experiment in providing rural services based on public participation and autonomous management,” said Mr. Frederick Temple, World Bank Country Director for Bangladesh. “The successful implementation of this project hinges on the government’s ability to protect the independence of the Board and of the rural cooperatives.  Investment planning and project implementation must continue to be determined by economic criteria. By preserving the integrity of these institutions, the Government of Bangladesh demonstrates its commitment to a meaningful rural electrification program” added Mr. Temple.

Under the Project the Cooperatives will manage and revitalize a substantial portion of the rural network currently operated by the Bangladesh Power Development Board.  The cooperatives have proven to be effective at quickly rehabilitating systems, reducing system losses, and substantially curbing power theft.  Expanding the energy distribution infrastructure and increasing financial discipline will further contribute to energy efficiency and improves power sector performance.

“The governance partnership—between the cooperatives and the Rural Electrification Board—operates with a degree of efficiency and customer orientation seldom seen in similar utilities in developing countries,” said Mr. Vijay S. Iyer, Senior Financial Analyst and Task Leader for the project.

The project will support stand-alone generation and distribution systems such as privately-operated small renewable energy projects.  As one of its key goals, the project aims to support the development of a viable solar energy market in rural areas.  Over its 15-year life, the project will reduce global output of greenhouse gases.  The Project will offset production of carbon dioxide by replacing kerosene use with carbon dioxide-free renewable energy sources.

The total project cost is US$298.30 million, of which US$ 190.98 million will be financed by an interest-free credit from the International Development Association (IDA) and a US$ 8.2 million grant from the Global Environment Facility (GEF).  The balance is being financed by US$ 6.78 million from local micro-finance institutions, households, communities and NGOs, and US$ 92.34 million is being financed by the Government of Bangladesh.

¹About the GEF:

The GEF is a financial mechanism which provides grant and concessional funding for recipient countries for projects and activities that address climate change, biological diversity, international waters, and depletion of the ozone layer. The World Bank shares the responsibility for implementing GEF activities with the United Nations Development Programme (UNDP) and United Nations Environment Programme (UNEP).

For more information on this project visit: http://www4.worldbank.org/sprojects/Project.asp?pid=P071794
 
The World Bank Bangladesh website: http://www.worldbank-bangladesh.org