Another 1,320-megawatt coal-fired power plant using ultra-supercritical technology has been made ready in Kalapara of Patuakhali. Built as a joint venture between Rural Power Company Limited (RPCL) and Norinco Power International Company, this plant has pushed the country’s total power generation capacity to about 27,500 megawatts. Yet even during peak hours, the highest demand so far in the country has been just over 16,400 megawatts, meaning that at least 10,000 megawatts of capacity remain idle. The government is having to pay extra capacity charges despite not using that electricity.
There are nearly 2,000 megawatts of high-efficiency gas-based power plants in Meghnaghat of Narayanganj. But they cannot run at full capacity because of the gas shortage in the country. Besides that, a high-efficiency gas-based power plant was built in Rupsha of Khulna, but there is still no supply of gas for it. The country is facing a shortage of at least 1,000 million cubic feet (MMcf) of gas daily compared with demand. To keep the power plants running, costly liquefied natural gas (LNG) is being imported.
The previous Awami League government accumulated huge liabilities over the past one and a half decades as it could not manage excess capacity in the power sector and shortages in the energy sector. A large amount of foreign currency has gone out of the country due to power plant construction contracts without tenders and importing LNG instead of exploring gas. The country fell into a severe financial crisis. After the fall of the AL government, there was strong expectation of long-term and sustainable reforms in the power and energy sectors when the interim government took over. But over the past year, apart from some legal reforms and settling arrears, the government has not taken much initiative to ease the financial pressure in these sectors. It has not been able to outline a sustainable plan. Those involved in the sector believe that unless short-term measures are taken to address subsidies, capacity charges, and the gas shortage, this sector could create a major financial burden for the next government.
Following the fall of the AL government, outstanding dues in the power and energy sectors stood at around BDT 700 billion. Of this, Petrobangla owed BDT 270 billion in the gas sector (as of last November), while BPDB’s dues in the power sector were around BDT 450 billion. The interim government managed to settle these dues within a year. However, experts believe reducing subsidies through efficient management would have been more significant than simply clearing arrears. In the recently concluded FY 2024-25, the interim government spent BDT 620 billion in subsidies for the power sector and BDT 89 billion for the gas sector, particularly for LNG.
Energy expert Professor Dr. Shamsul Alam told Bonik Barta, “Like in other reform areas, a separate reform committee was needed to ensure efficient and cost-effective management of the power and energy sectors. But the government did not do that. The white paper it released on these sectors is very generic. It failed to properly address wasteful spending and corruption. As a result, the government has not been able to cut costs. These issues are continuing in line with the previous government. So the burden on consumers has not eased.”
One of the biggest reasons for financial losses in the power sector is unnecessary projects, which only increased liabilities under the previous government. Excess capacity forced the state to keep power plants idle while still paying capacity charges, causing huge losses. There have been allegations of irregularities in those power plant construction deals. After taking office, the interim government formed a national committee to review the purchase agreements of large-capacity plants, including Adani’s. The government is still working to renegotiate tariffs with these plants. However, according to sources, discussions have not gone beyond the negotiation stage. No major decision has yet been made on tariff revisions or reducing capacity charges.
Due to poor planning and unchecked rent-seeking in the power sector, excess capacity was built, leading to nearly BDT 1.5 trillion in capacity charges so far. Between FY 2010–11 and 2024–25, subsidies in the power sector alone amounted to BDT 2.36 trillion. Of this, BDT 620 billion was spent in the last fiscal year alone.
In the gas sector, inadequate investment prevented large-scale domestic supply. Based on the assumption that Bangladesh had no significant reserves, state-owned exploration company BAPEX was kept almost inactive. Instead, LNG imports began in 2018, which have cost BDT 2 trillion to date. By contrast, in the past two decades, only BDT 80 billion was invested in domestic gas exploration.
To reduce imports, the government has taken up large drilling projects for domestic gas exploration. However, plans to build skilled manpower, enhance technical capacity, and bring discovered gas into the grid are still progressing under the old approach. Since domestic gas supply has not increased, the government continues to spend heavily on subsidies.
Industry insiders warn that unless these issues in power and gas receive sustainable and well-planned solutions, the next government will face an even greater economic burden. The government, however, insists that fundamental reforms in the power sector have already begun, and necessary initiatives are underway.
After assuming office, the interim government repealed the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act, 2010, in an effort to address mismanagement and irregularities. The government has been praised for scrapping the controversial law. Yet experts note that as the contracts signed previously under this act have not been made public, citizens still do not know the full extent of the activities carried out through it.
Reforms in the power and energy sector are not just about implementing contracts. Analysts in this sector believe that reform means strengthening state-owned institutions through efficient management, increasing investment, ensuring guarantees, and enhancing financial capacity.
Shafiqul Alam, Lead Analyst (Energy) at the Institute for Energy Economics and Financial Analysis (IEEFA), told Bonik Barta, “Reforms in the power and energy sector have to be long-term. But reform is not only about implementing contracts. Rather, it means reducing the financial losses of this sector through efficient management. It means giving assurance to those who are investing here. In other words, there needs to be sovereign guarantees. In this case, the government must think about how to structure a payment security mechanism. That is to say, bringing in foreign investors in the power and energy sector is essential. This government may not be able to do all of it. A specific roadmap must be laid out for the next government. In other words, guidelines must be given on the areas where the government is incurring waste in the long term.”
According to BNP Standing Committee member and former State Minister for Power Iqbal Hasan Mahmud Tuku, the power and energy sector was the biggest channel of money laundering and embezzlement under the AL government. He believes that reform in this sector means disclosing the contracts signed during the Awami League’s tenure, which the people have a right to know. He told Bonik Barta, “The biggest sector of corruption under the Awami League was power and energy. The main responsibility of this government was to make public the contracts signed under the special law during their (AL) tenure. But they have failed to do that. Before paying off the huge liabilities of this sector, it should have been renegotiated keeping in mind the financial losses of the people and the country. But the government has highlighted the repayment of dues as the biggest positive outcome. Yet paying off this money means huge commissions have already gone into the pockets of the Awami League. The reform the government is talking about and what is actually happening leaves no chance of reducing financial pressure on the next government. Because nothing like capacity charges, efficient management, or cost-cutting has been reformed.”
Sources at the Ministry of Power, Energy and Mineral Resources said the government has prioritized subsidy management and cost reduction in the power and energy sector over the past year as part of a major savings initiative. Subsidies amounted to BDT 620 billion in FY 2024–25, which has been reduced to BDT 370 billion in the current fiscal year. The Bangladesh Power Development Board (BPDB) launched several reform measures with a plan to cut expenses by 10 percent, which has already saved BDT 15 billion. The service charge on liquid fuel imports has been reduced from 9 percent to 5 percent, saving an additional BDT 4.7 billion this year.
Tariffs for the Matarbari coal-fired power plant were set at a lower rate, while ten outdated and expired IPP and rental power plants were shut down. These moves saved BDT 25 billion and BDT 5.25 billion, respectively. Furthermore, lowering tariffs for power produced by state-owned companies has saved another BDT 26.3 billion.
When asked, Muhammad Fouzul Kabir Khan, Adviser to the Ministry of Power, Energy and Mineral Resources, told Bonik Barta, “The interim government introduced legal reforms in the power sector right after taking office. These reforms created competition in the sector. With the repeal of the special act, no one can now secure work exclusively. However, there are some crises in the gas sector. Especially due to the gas shortage, large power plants cannot be operated. These issues cannot be resolved immediately, but eventually they will be.”
In response to a question on whether structural reforms in capacity charges and reducing subsidies could ease the financial burden on the next government, the Adviser said, “We are working on issues like electricity tariff structures and return on equity. The goal is to create a favorable situation for the next government in this sector. However, there are certain obstacles when it comes to canceling contracts or amending tariff structures.”