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Prepayment in Bangladesh

The Bangladesh Power Development Board (BPDB) is responsible for electricity distribution in most of the areas in Bangladesh, except for Dhaka metropolitan City and its adjoining areas and some of the rural areas. Responsibility for electricity distribution in and around Dhaka Metropolitan City lies with Dhaka Electric Supply Authority (DESA) and Dhaka Electric Supply Company (DESCO). The remaining countryside is the responsibility of the Rural Electrification Board (REB).

The current chairman of BPDB, Engr. Syed Abdul Mayeed, is committed to the vision “to provide access to affordable and reliable electricity to all by the year 2020.” Achieving the vision will not be easy, since there are severe shortages of generation capacity in Bangladesh. The lost output due to electricity shortages is as high as one percent of GDP. However, the most urgent problem lies within the distribution arena, where system losses are crippling the finances of the utility.


Distribution is the weakest link in the industry, and high technical and non-technical system losses remain the fiercest challenge. Out of the integrated entity that was BPDB from its inception in 1972, several organisational solutions are being tried to improve the performance of the distribution system. The formation of DESA and DESCO has met with limited success.

Other initiatives over the years have included:

  • Outsourcing of the commercial services – contracting out meter reading and billing.
  • Introduction of computerised billing in selected areas.
  • Administrative actions like cut-offs and legal penalties.

Despite these initiatives, system losses are between 20% and 30%. The criminal activities of both employees and customers remain the single most important problem leading to large-scale power theft in BPDB, thus endangering the utility’s financial and commercial viability.


In 1995 BPDB, together with the German Development Bank KfW, decided to investigate the concept of prepayment as an option to reduce system losses and reverse the financial drain on the utility. The then chairman of BPDB, Mr. Rahman, and the current chairman Mr. Mayeed, visited South Africa with a consultant financed by the German government through KfW. They concluded that prepayment may be a viable tool for Bangladesh and recommended to KfW that a feasibility study be conducted prior to implementing a pilot project.

Feasibility studies incorporating site surveys, financial analyses and tariff impact studies were prepared. Based on these studies, BPDB received a grant from the German government through KfW under German-Bangladesh Financial Co-operation for the cost of a prepaid pilot on a Rehabilitate, Operate and Maintain (ROM) basis for a five year operation period. In 2001 Fichtner, in association with Utility Design Services of South Africa, were selected as consultants to BPDB for a pilot project in Chittagong.

There are numerous reasons for the system losses at the distribution level and BPDB chose to tackle the problem from a pragmatic point of view. Each pilot project is scoped to include network rehabilitation and replacement of service connections. The scope also includes intensive training courses and an element of marketing and PR.


From a technical perspective BPDB has chosen two distinct options of the pilots will ultimately indicate which tech-nology is best for the Bangladesh environment.

The unit transfer system chosen is the Standard Transfer Specification (STS) keypad meter system with the stepped tariff implemented in the vending system. The advantage of this system is that the meters are inexpensive and require very little maintenance. The tariff complexity is implemented in the vending system, which means that time-of-use tariffs cannot be implemented with this system. Data at each of the vending points must also be synchronised at least twice a day.

The currency transfer system chosen is any two-way token currency transfer system. The meters require real-time clocks and battery back-up. The advantage of this system is that it can implement stepped tariffs in the meter and also can support time-of-use tariffs. The cost of the meter and maintenance of clocks and batteries in the Bangladesh environment need to be considered.

BPDB, assisted by KfW, have decided to pilot the PPP approach – where operators provide turnkey solutions – and contrast it with self-financed pilot projects where BPDB takes over a site after successful commissioning.


The overall objective of the project financed under German Financial Co-operation through KfW is the efficient economic utilisation of the electrical energy provided by BPDB. More specifically, the idea is to reduce the non-technical losses in the three selected feeder areas in Chittagong, thus reducing distribution losses from about 34% to about 14% and improving the collection/billing ratio from approximately 65% to 95%. The collection/billing rate for prepayment customers is by definition 100%, since all ‘billed’ amounts are prepaid. 95% was chosen to allow for the non-prepayment collections. The total loss figure includes technical losses, illegal connections, losses on conventional meters and tampering and bypassing of prepayment meters.

A call for tenders for supply, installation and testing & commissioning, operation and maintaining of a prepayment metering system in three feeders at Chittagong on a Rehabilitate, Operate & Maintain (ROM) basis has been issued. Please visit www.metering.com/tenders for more information.

The scope of the rehabilitation portion of the project comprises the supply of network rehabilitation, metering and vending equipment, as well as the installation and commissioning of the equipment. Costs for

these services will be paid directly to the successful bidder.

The scope of the operations and maintenance portion of the contract includes the operation and maintenance of the 11kV feeders, all customer services (both prepaid and conventional) and operation of the billing and vending systems, as well as collection of cash and credit management. The operating company will bid an 11kV bulk tariff rate for the selected feeders, and the differential between this rate and the end-customer tariffs will cover the operating company’s overhead costs and margins.

The objective of this project is to tackle the problems of accounts receivable and non-technical system losses in electricity distribution on a pilot basis. The main project measure is the implementation of a prepayment metering pilot scheme (with at least 10,000 prepayment meters, five vending stations for the sale of tokens and one management station) in three areas of the city of Chittagong. The project-executing agency is BPDB, while the prepayment metering system is to be operated by a private company to be determined by international competitive bidding.

The consultants conducted a comprehensive survey and compiled a detailed bill of quantities. An operating contract was developed and bid documents were issued in 2002. In August 2003 BPDB instructed the consultants to reissue the bid, since none of the three bids received were fully responsive. The new bidding documents are now available, and the bid will close early in 2004.

The groundwork laid by the consultants in the KfW-financed project convinced BPDB to self-finance a number of prepayment initiatives. BPDB has issued self-financed bids for the supply, installation and 12 month maintenance of prepaid meters in areas such as Bogra, Chittagong, Rajshahi and Sylhet. One contract has already been awarded for close to 2500 meters in Sylhet. Installations are expected to start early in 2004.


BPDB is committed to prepayment, and its approach encourages innovation from a range of system suppliers. The technology of choice for full implementation will depend on the success of the various pilot projects. If prepayment proves to be successful in increasing collections and reducing system losses, the market potential in Bangladesh is huge – 15 million households in the country are still without access to electricity.