Can electricity tariffs be kept at their current level for the next two years? The question has arisen after the newly formed Bangladesh Nationalist Party (BNP) government signalled that it does not wish to increase power prices during that period.
The newly elected government’s Power Minister, Iqbal Hasan Mahmud Tuku, and State Minister Anindya Islam Amit held a meeting on Sunday with senior officials from electricity generation, distribution and transmission companies.
Among those present were Power Division Secretary Farzana Mumtaz and the Chairman of the Bangladesh Power Development Board (BPDB), Engineer Md Rezaul Karim, along with other senior executives from across the power sector.
The government does not intend to raise electricity prices for at least the next two years, Mr Mahmud made clear in his message to senior officials, as it seeks to ease pressure on households already strained by repeated tariff hikes under the previous administration.
During the tenure of the Bangladesh Awami League, electricity prices were increased at regular intervals, prompting widespread public frustration. Taking this into account, the new government has instructed officials to explore ways of resolving the sector’s financial crisis without passing additional costs on to consumers.
Mr Mahmud directed Power Division officials to reduce system losses from the current 6 per cent to 5 per cent — a cut of 1.38 percentage points. He also said he would seek Tk 44,000 crore in accumulated arrears, built up since the 2021 gas tariff rise, from the Ministry of Finance.
However, officials from power companies expressed scepticism about the government’s plan, noting that the gap between distribution and generation costs has risen to more than Tk 5 per kilowatt hour.
The government is also under pressure from the International Monetary Fund (IMF) to adjust electricity tariffs to cost-reflective levels within three years through fiscal measures, amid mounting outstanding arrears of around Tk 40,000 crore.
Shafiqul Alam, lead energy specialist for Bangladesh at the Institute for Energy Economics and Financial Analysis (IEEFA), expressed hope that tariffs could be kept stable by phasing out oil-fired power plants and introducing smarter mechanisms to identify and run more efficient gas-fired plants.
“Reducing oil-fired generation to a tolerable level and operating efficient gas-fired plants at an 80 per cent plant load factor would help to ease the financial burden to some extent,” Mr Alam said.
He noted that gas-fired plants operating at below 20 per cent load factor can cost Tk 15–16 per kilowatt hour, whereas at 80 per cent load factor, the cost falls to around Tk 5–6 per unit.
Officials said the meeting aimed to provide the ministers with an overview of the financial, technical and operational condition of companies in the power sector. During the discussion, BPDB highlighted its mounting financial crisis. In the last fiscal year alone, the government provided subsidies of approximately Tk 670 billion. Significant liabilities have also accumulated in the current fiscal year, while allocations to the power sector were reduced during the interim administration to Tk 380 billion.
“I cannot see how tariffs can be kept at their current level for two years,” one official said.
During a recent hearing on converting the Bhola gas tariff to an LNG-based format, Power Division officials indicated that tariff adjustments might be unavoidable. However, the two ministers advised officials to focus instead on reducing operational costs.
They also suggested revisiting tariff negotiations with power producers through a committee formed during the interim government, with a view to lowering generation costs rather than transferring the burden to consumers.
Several officials present at the meeting, speaking on condition of anonymity, said the ministers’ position was clearly aimed at resolving the crisis without raising prices. Emphasis was placed on cutting system losses, trimming operational expenses and renegotiating contracts to contain subsidy requirements.
According to Power Division officials, the average bulk power supply cost ranges from Tk 12.97 per kilowatt hour, against an average bulk sales tariff of Tk 7, leaving a deficit of Tk 5.97 per unit.
BPDB officials said they received Tk 38,637 crore against a demand for Tk 43,170 crore in the 2024–25 fiscal year. In the current fiscal year, BPDB has sought Tk 36,462 crore but has received Tk 20,299 crore over the first eight months.
BPDB officials identified adequate gas supply and funding for fuel procurement as the principal challenges facing the power sector.