The government has rejected a proposal to increase the incentive for Heavy Fuel Oil (HFO).
The Power Division issued an official letter regarding this on Sunday.
The official order stated that the advisory committee also decided to cut the incentive. Additionally, Bangladesh is negotiating with the International Monetary Fund (IMF) regarding the next installments of the USD $4.7 billion loan.
The order further mentioned, ‘The government has no plan to review the 5 percent service charge incentives. However, the government will allow the Independent Power Producers (IPPs) to import the necessary fuels for electricity generation through the Bangladesh Petroleum Corporation (BPC).
The president of the Bangladesh Independent Power Producers (BIPP) has called for a 12 percent increase in the service charge under the power purchase agreement, citing economic changes and delayed payments.
In a letter dated February 11, 2025, David Hasnat stated, “Independent Power Producers (IPPs) are facing an unsustainable financial model. The increased costs associated with letters of credit (LCs) alone account for a significant portion of the gap between current operational costs and the 9 percent service charge.” He warned that IPPs could no longer absorb these additional expenses, which threaten both financial stability and operational reliability.
However, on February 14, the government reduced the HFO import incentive for IPPs from 9 percent to 5 percent. This decision aims to save Tk 470 crore annually while generating 5,500 MW of electricity in the private sector, in line with the IMF’s austerity measures.
On February 14, the Bangladesh Power Development Board (BPDB) issued a letter regarding the decision, which was sent to 48 HFO-based private power plants. Official sources confirmed the details on Sunday. According to the letter, signed by BPDB Secretary Md Rashedul Hoque, “It is hereby informed that the service charge for fuel oil (HFO) importation by HFO-based power companies importing under their own arrangement has been fixed at 5 percent, down from the previous 9 percent.”
