Power Sector Strains Under Subsidies, Tariffs and Debt

Prelude - Bangladesh's power sector is grappling with a wide range of challenges despite sustained government investments intended to build domestic and foreign confidence.

- Engr. A R Mohammad Parvez Mazumder

The problems span delayed bill payments, rising subsidies, tariff gaps, liquidated damage deductions, surplus generation capacity, contractual obligations, and more. Although infrastructure has expanded significantly and subsidies have surged, the country continues to face inefficiencies and mounting arrears that now threaten the sector's long-term sustainability.

Escalating Subsidies

The Bangladesh Power Development Board (BPDB) purchases electricity at high cost and sells it at lower regulated prices, requiring substantial government subsidies to cover the shortfall. Despite expanded generation capacity, Bangladesh remains heavily dependent on imported fuel, driving up production costs.

Over the last five fiscal years, the country has spent roughly Tk 1.474 trillion in subsidies. Between FY 2020-21 and FY 2023-24 alone, subsidies totaled Tk 854.11 billion, and the revised FY 2024-25 allocation represents an all-time high. From FY 2020-21 to FY 2024-25, electricity subsidies have increased by nearly 700%. (Table 1)

In the same five-year period, subsidies to the gas and LNG subsectors totaled Tk 680.54 billion, marking a 400% rise. (Table 2)

The core driver is Bangladesh's reliance on costly imported LNG, sold domestically at much lower rates. For example, Petrobangla's supply cost per cubic meter (NG + LNG) is Tk 29.39, while consumers pay only Tk 22.87, creating a significant revenue gap that subsidies must fill.

Unpaid gas bills further exacerbate fiscal stress. As of February 2025, industrial sectors owed more than Tk 210 billion to six major gas distribution companies. (Table 3)

Total arrears are expected to exceed Tk 230 billion once the March-April 2025 dues are counted. Despite this spending surge, the sector continues to suffer from deep inefficiencies, primarily due to rising costs associated with imported fuel and idle generation capacity.