The government is set to engage in crucial discussions with the visiting International Monetary Fund (IMF) mission on nine sectoral and fiscal reform measures in the power sector.
“We are preparing through a marathon meeting in the Power Division today,” an official who attended the session told Just Energy News. The official noted that several reforms are already underway, including the suspension of the Special Power Act.
The government has reduced fuel import incentives to 5%, a move expected to significantly cut costs in the power sector. Additionally, several unsolicited deals—primarily with Summit Group’s small power projects—have been scrapped following the expiry of their terms.
The Bangladesh Power Development Board (BPDB) has also proposed a review of the coal tariff for Adani’s Jharkhand-based power plants, citing their comparatively higher costs.
Three-Year Roadmap to Narrow Tariff Gap
The interim government is drafting a three-year roadmap (FY2026–FY2028) aimed at reducing the gap between electricity generation costs and retail tariffs. The plan, which includes gradual tariff adjustments and safeguards for low-income groups, is part of a broader strategy to ensure fiscal sustainability.
This roadmap was a key topic during a recent virtual coordination meeting ahead of the IMF team’s arrival. Dr. Ziaul Abedin, Additional Secretary of the Finance Division, chaired the meeting, held under the framework of the IMF’s Extended Credit Facility (ECF) and Resilience and Sustainability Facility (RSF).
Gradual Phase-Out of Subsidies
The Power Division has announced plans to phase out power subsidies within two years. While immediate tariff hikes are not on the cards, adjustments may occur in FY26, depending on generation costs.
“We’re considering area-based tariff structures. Residents of affluent areas like Gulshan, Banani, and Dhanmondi may face higher rates,” said a Power Division official who asked not to be named.
An IMF consultant has been requested to assist with the implementation of the roadmap. The official also confirmed that nine strategic measures have been proposed to reduce costs by 10%, aiming to make tariffs more sustainable. “We plan to include these measures in the roadmap, despite the IMF’s reservations,” the official added.
Tk 11,444 Crore in Savings Targeted
One key measure under review is Adani Power’s coal pricing formula, which, if revised, could save Tk 11,444 crore in FY24–25. However, officials estimate that around one-third of this target may realistically be achieved.
Muhammad Fauzul Kabir Khan, Power and Energy Adviser, reaffirmed the government’s commitment to reducing subsidies through better internal management.
“It is possible to save Tk 11,444 crore within a year through cost-cutting measures introduced by the Ministry of Power, Energy and Mineral Resources,” he said, adding that these savings would ultimately benefit the public.
Despite these initiatives, Power Secretary Farzana Montaz clarified that there are no immediate plans to increase electricity tariffs.
Key Issues on IMF Agenda
According to Power Division sources, the nine reform points to be discussed with the IMF include: operational and fiscal performance of the BPDB for FY2025, and projections for FY2026, status of subsidies received and projected for FY2025 and FY2026, external and domestic arrears, progress on the roadmap to reduce the gap between generation cost and tariffs, status of capacity payments, review of the committee’s findings on power projects, impact of automation in fuel pricing, and power supply challenges in industrial zones.
Prof. M. Tamim, Vice-Chancellor of Independent University Bangladesh (IUB), welcomed the reform push. “We appreciate the government’s focus on internal restructuring, which will help stabilize tariffs,” he said.Show trimmed content