The Economic Relations Division (ERD) is going to seek $300 million from the World Bank (WB) for this purpose.

A total of Tk 3,700 crore has been proposed for power sector development in the coming fiscal year and it is the highest allocation of FY 07-08 as a single sector, planning ministry sources said.

The revised allocation for the power sector in the current fiscal year is Tk 2,779 crore, which is 6 percent less than that of the previous fiscal year.

"There is no doubt that the power sector is getting priority in budgetary allocation and it is much higher this time compared to allocations in recent few years," said a top official of the planning ministry.

He said allocation for the power sector was decreased by 0.47 percent in FY04-05 and it witnessed a slight increase (0.47 percent) in FY05-06.

Of the other top sectors, education and religion will jointly get Tk 3,700 crore and rural development and institutions Tk 3,500 as budgetary allocation, sources said.

Sources said the government is going to seek the credit for the power sector development under the World Bank's special scheme Power Sector Development Credit (PSDC) programme instead of the existing Development Support Credit (DSC) programme.

The WB has already given the green signal for the credit which encouraged the government to go for increasing investment in the power sector development significantly in the next Annual Development Programme (ADP), sources in the ERD said.

The government has meantime started discussing the matter with the WB and will soon send a letter to the WB in this regard.

The planning ministry at a meeting on Friday finalised the ADP for the next fiscal year at Tk 26,500 crore, of which Tk 13,700 crore (52 percent) is local resources and Tk 12,800 (48 percent) is foreign resources. More than Tk 2,000 crore of this amount would come under the PSDC.

Allocation for the power sector during FY02 and FY07 was Tk 17,244 crore while the expenditure was Tk 14,040 crore as of December 2006.

Sources said the expenditure mostly covered power distribution while a significant amount was pocketed through corruption. The maximum amount of the PSDC will now be used for power generation, the sources added.

ERD sources said the WB allocated $700 million in three instalments of the DSC programme and the final instalment of $200 million has already been approved by the bank's board.

Sources said a $900 million budgetary support programme of the World Bank named Poverty Reduction Sector Credit (PRSC) is scheduled to be launched next fiscal year. Under the three-year programme, Bangladesh can get $300 million.

To start the programme, the government will have to sign a three-year conditional reform agreement with the WB. But as the present caretaker government may not hold power for long, the agreement for PRSC will not take place.

That is why the government has sought money from the World Bank under the special PSDC arrangement as an alternative.

To get the credit, the government will have to take reform measures in the power sector and implement a reform programme named "power sector financial restructuring and recovery plan".

The programme aims at reducing systems losses, increasing tariff rates, and making different power sector companies independent to make them more profitable.

Sources said under an Asian Development Bank programme, the government has already taken a few measures to reform the power sector and these measures also meet the WB requirements.