Bangladesh should adopt the lowest-cost mix of primary fuels for electricity generation and ensure timely payments to private producers to avoid supply risks, according to Imran Karim, chairman of Confidence Group.
In an interview with Just Energy News editor Md Shamim Jahangir, Karim warned that rising global energy prices, delayed payments to local producers and policy uncertainty could undermine investment and disrupt electricity generation. He also cautioned that prolonged geopolitical tensions, such as the ongoing Iran–Israel conflict, could significantly raise Bangladesh’s energy import bill.
Cost-effective power generation
Md Shamim Jahangir: How can Bangladesh make its power generation more cost-effective, particularly if geopolitical tensions such as the Iran–Israel conflict continue?
Imran Karim: The biggest burden on our power generation is the cost of importing primary energy. Therefore, we must focus on the most cost-effective fuel mix for electricity generation.
Energy taxes are also an important factor in calculating generation costs. Taxes are imposed on heavy fuel oil (HFO), high-speed diesel (HSD), coal and LNG. When comparing generation costs, these taxes should ideally be excluded because they remain within the country, while the actual fuel cost goes abroad.
We saw energy prices surge after the Russia–Ukraine war, and similar pressures could emerge from the Iran–Israel conflict.
For example, the government spent around $6–$7 billion on energy imports last year. If the Iran–Israel war continues for three to four months, Bangladesh may need an additional $3–$4 billion for energy purchases, which would also put pressure on foreign exchange reserves.
In such a situation, electricity should be produced using the lowest-cost fuel available.
For instance, the Bangladesh Power Development Board receives natural gas at a concessional rate and therefore prefers it for electricity generation. But LNG prices have recently reached around $23–$24 per MMBtu. If LNG costs $25 or $26 per MMBtu, while other fuels such as HFO cost between $10 and $15, it would make sense to use the cheaper option.
Bangladesh currently has the capacity to generate electricity from multiple types of primary energy. During the summer months, we must utilise our full generation capacity to ensure uninterrupted power supply. However, we have to purchase primary fuels at international market prices.
Risk of supply disruption
Md Shamim Jahangir: You have said power plants may be able to operate only until early April with the existing fuel stock if payments remain delayed. Could that lead to shutdowns?
Imran Karim: That is a sensitive way of putting it. To my knowledge, private power producers currently have fuel stock sufficient to operate plants until around April 7 to April 10.
At present there is no new import capacity because the sector lacks sufficient financial inflow. If we do not receive payments, how can we continue importing fuel?
After April 9 or 10, without fresh imports of primary energy, the consequences can be imagined.
If the government does not clear outstanding bills owed to private producers and instead settles liabilities through bonds, the private sector will have little capacity to import fuel. We want to support the government, but we are facing financial constraints. These issues require immediate solutions.
Rising import dependence
Md Shamim Jahangir: You have said the government’s liabilities are increasing because electricity tariffs have not been revised. Could you explain?
Imran Karim: In 2018–19, about 30–32% of the fuel used for electricity generation was imported, while the rest came from domestic gas.
However, domestic gas production has declined, forcing the country to import more natural gas. At the same time, electricity demand has grown significantly — from around 70,000 gigawatt-hours to about 102,000 gigawatt-hours, an increase of roughly 45%.
As a result, energy imports for power generation have increased by about 65%.
Previously, gas was supplied at around $2–$3 per unit because it came from domestic fields. Now we are importing gas at $10–$25. Naturally, the cost of power generation has increased.
However, electricity tariffs have hardly changed. In 2018–19 the tariff was around 7.7 US cents per kilowatt-hour, and today it is about 7.8 cents. Meanwhile, the fuel mix has shifted towards imported energy, which must be paid for in US dollars.
Ultimately, the government must decide whether to pass the increased cost on to consumers or cover it through higher subsidies.
Disparity between foreign and local producers
Md Shamim Jahangir: You have mentioned that the gap between foreign investors and local power companies is widening. How so?
Imran Karim: Outstanding payments to foreign companies are typically delayed by only two or three months, but for local companies the delay is often seven to eight months.
Contract provisions also differ. For example, the authorities impose liquidated damages for operational outages on local producers, but similar penalties are not always applied to foreign companies in comparable situations.
The operational disruptions we face are largely due to delayed payments. If you run a business but do not pay salaries for six or seven months, how long will employees continue working?
If we cannot generate electricity because payments are not made, should we be held responsible?
Concerns over policy consistency
Md Shamim Jahangir: A review committee formed during the interim government has examined several independent power producer agreements and suggested revisions. What is your view?
Imran Karim: A signed agreement is a signed agreement. It is important to remember that such contracts are signed with the Government of Bangladesh as a state entity, not with a particular administration.
If a new government seeks to reinterpret or disregard agreements signed by its predecessor, it creates uncertainty.
Power projects usually involve contracts lasting 15 to 20 years. Investors take risks that span multiple political cycles. Without policy continuity, such long-term investments become very difficult.
You can already see the impact. In the latest tender for about 5,200 MW of solar power capacity, only around 900 MW was awarded.
Investment outlook
Md Shamim Jahangir: Bangladesh has attracted investment in around 55 private power plants. Do you think the current situation could discourage further investment?
Imran Karim: Yes, it could. Investors need certainty that agreements will be honoured.
If authorities can reject or reinterpret agreements at any time, it damages confidence. Such signals are not encouraging for investors.
Expectations from the new government
Md Shamim Jahangir: What do you expect from the newly elected government?
Imran Karim: We are citizens of this country. We live here and will continue to do so.
For my business, I have signed agreements with the government for 15–20 years. I have a financial stake in ensuring that my investment remains safe in Bangladesh during this period.
Ultimately, whatever we do should create a win–win situation through strong public–private partnership.