The question arises as the Power Division aggressively pushes reforms in the power sector, left by Sheikh Hasina’s government, to save approximately Tk 11,444 crore in the 2024-25 fiscal year. The move comes ahead of the International Monetary Fund’s (IMF) next mission to Bangladesh next month.
How to Save Costs?
“We have already identified nine key areas where we can achieve a 10% cost reduction, amounting to Tk 11,444 crore,” an official from the Power Division stated.
As part of these measures, the government plans to increase gas supply to power plants from the current 913mmcfd to 1,100mmcfd. The Power Division has also reached an agreement with the Energy and Mineral Resources Division to supply an additional four LNG cargoes for power generation, costing Tk 2,400 crore.
Additionally, maximising coal-fired electricity generation is expected to save Tk 5,957 crore. Power Division officials confirmed that most coal-fired power plants, including another unit of Adani, have resumed operations following maintenance.
For the 1,320MW Rampal and 1,200MW Matarbari coal-fired power plants, the government will require $350 million to import coal between March and June this fiscal year.
The Bangladesh Power Development Board (BPDB) has increased coal import payments and opened new letters of credit to ensure uninterrupted operations.
Secondly, the government plans to settle at least 50% of overdue payments for 1,000MW of imported electricity, which currently amounts to $631 million.
The Power Division has also instructed BPDB to reduce internal costs by Tk 370 crore to meet the government’s savings target. As part of this effort, BPDB is exploring options to rent out its infrastructure to generate additional revenue.
The government has decided to terminate contracts with several rental, quick rental, and independent power plants with a combined capacity of 682MW.
Some of these plants have already ceased operations due to fuel shortages, while others, including Summit’s small independent power producers (IPPs), continue operating under verbal ministry approval. Shutting down these plants is expected to save Tk 682 crore, according to Power Division officials.
Additionally, the government plans to pay the bills for 1,000MW of imported electricity within 30 days of invoice submission to secure a 1% rebate, which could save Tk 65 crore.
The Power Division has taken steps to reduce costs associated with heavy fuel oil (HFO) imports.
They include discouraging third-party HFO imports, which will save 7% in import duty, amounting to Tk 335 crore, shifting to larger transport vessels (20,000 tonnes instead of 15,000 tonnes), saving Tk 354 crore, and reducing HFO import incentives from 9% to 5%, leading to savings of Tk 470 crore.
Cost Reduction in Adani Power Deal
The government is expected to save Tk 3,001 crore annually by reviewing the power purchase agreement (PPA) with Adani Power Ltd (1,492MW).
While BPDB and Adani previously had a side letter agreement for coal supply pricing, it was scrapped last year. The government now seeks to renegotiate the coal price formula for Adani’s power plant.
Meanwhile, Adani has offered BPDB a $50 million concession if the overdue payments are cleared by June 2025.
What Experts Say
Prof. M Tamim, Vice-Chancellor of the Independent University of Bangladesh (IUB), welcomed the interim government’s initiatives to cut costs.
“We appreciate the government’s move to reduce internal expenses through reforms, which will help keep power tariffs stable,” he said. However, he stressed that the government must build trust among stakeholders to ensure successful reforms in the power sector.
Government’s Perspective
Muhammad Fauzul Kabir Khan, Power and Energy Adviser, stated that the government is committed to reducing the subsidy burden through internal management and sectoral reforms.
“It is possible to save Tk 11,444 crore through cost-cutting measures initiated by the Ministry of Power, Energy, and Mineral Resources,” he said, adding that the savings would ultimately ease the financial burden on the public.
