The Bangladesh government has approved a Tk 6,000 crore (£approximately 400 million) interest-free loan for the state-run Bangladesh Power Development Board (BPDB) to buy heavy fuel oil (HFO), as gas supplies to power stations fall amid delays in liquefied natural gas (LNG) procurement.
The Finance Division approved the funding on Sunday as the government seeks to shore up electricity supplies during an ongoing power crisis. The move is aimed at allowing oil-fired power stations to increase generation while freeing up scarce gas supplies for industrial users.
According to a government memorandum issued on 30 August by Finance Division deputy secretary Shihab Uddin Ahmed, the funding will support fuel purchases for liquid-fuel power plants expected to generate an average of 4,000 megawatts (MW) of electricity a day.
The money has been allocated from the government’s Operating Loan budget for the 2026-27 financial year and has already been disbursed to the BPDB.
Under the arrangement, the loan will be interest-free. The government will absorb the amount against actual losses in the power sector, with repayment due to begin in March 2027. The arrangement will also be linked to a four-month subsidy programme running until June 2027.
The BPDB has been instructed to sign a formal loan agreement with the Finance Division.
The government said spending under the allocation must comply with Bangladesh’s Public Procurement Act 2006, Public Procurement Rules 2008 and other applicable financial regulations.
The latest move highlights growing pressure on Bangladesh’s electricity system, with the government turning to oil-fired generation to maintain supplies and reduce the risk of further disruption to households and industry.
The BPDB has drawn up a plan to generate 4,000MW from 33 oil-fired power plants. On 23 August, it submitted a requisition for 87,350 tonnes of furnace oil to be procured through the state-owned Bangladesh Petroleum Corporation (BPC), following requests from 33 private power plants.
The Power Division has requested Tk 6,500 crore for the Bangladesh Power Development Board (BPDB) to import 630,500 tonnes of furnace oil, which would be used to generate 4,000MW of electricity each day a month.
Officials said the Ministry of Power, Energy and Mineral Resources had decided to increase generation from furnace-oil-fired plants in order to divert gas supplies to industrial users.
The reduction in gas supplies has been linked to delays in LNG procurement amid the wider disruption caused by the US-Iran conflict.
“Gas supplies to power plants have fallen by a maximum of 110 million cubic feet a day, from 960 million cubic feet,” a Petrobangla official told Just Energy News.
The Ministry of Power, Energy and Mineral Resources said gas had been diverted from power plants to industrial units following an instruction from the Prime Minister on 21 August.
The government is therefore relying more heavily on liquid-fuel power generation to compensate for the shortfall in gas-fired generation while attempting to protect industrial production and electricity supplies.