Power Subsidy Increased by BDT 220b

The power sector subsidy allocation increased by BDT 220 billion to BDT 620 billion for the current fiscal year (FY2024-25). It shows a 77% hike compared to the FY’s original allocation of BDT 400 billion. The Ministry of Finance has finalized the revised budget for the FY with the increased subsidy allocation.

- Aditya Hossain

In FY 2023-24, the power sector subsidy was BDT 350 billion. The increase in subsidy was followed by a request by the Power Division to address the financial losses of the Bangladesh Power Development Board (BPDB).

To resolve the financial crisis in the power sector, a meeting between the Ministry of Finance and the Power Division was held recently when the Power Division requested an additional allocation of BDT 305.75 billion for sectoral development and operations, beyond the subsidy. However, the Finance Ministry proposed allocating only BDT 136.58 billion. Discussions in the meeting included determining tariffs for private power plants, reducing unnecessary capacity charges, increasing renewable energy capacity to 10% by 2030, and lowering overall electricity generation costs.

Experts argue that BPDB’s growing debt is the outcome of setting up power plants without considering long-term demand and financial feasibility. According to data from the Power Division, in the past 15 years, the government has paid BDT 1.4 trillion in capacity charges to the power plants.

Additionally, the White Paper, which was unveiled recently, stated that excessive power plant installations beyond actual demand led to an unnecessary subsidy expenditure of BDT 400 billion. Experts believe that increased reliance on imported fuel and rising global energy prices have significantly raised power generation costs in recent years.

In FY 2023-24, the electricity generation cost dropped slightly to BDT 11.84 per unit, compared to BDT 12.03 in the previous year. However, the bulk electricity selling price remains at BDT 7.04 per unit, meaning BPDB incurs a loss of BDT 4.80 per unit sold. Due to continuous financial losses, BPDB is facing an extreme financial crisis.