[🇧🇩] Energy Security of Bangladesh

[Saif]

The farce of fixing LPG prices

For millions of households already grappling with surging inflation, the sharp increase in the price of liquefied petroleum gas (LPG) - an essential cooking fuel - could not have come at a worse time. Adjusted monthly in line with international market trends, LPG prices witnessed the steepest singl

thefinancialexpress.com.bd

The farce of fixing LPG prices

Atiqul Kabir Tuhin

Published :
Apr 05, 2026 00:22
Updated :
Apr 05, 2026 00:22

For millions of households already grappling with surging inflation, the sharp increase in the price of liquefied petroleum gas (LPG) - an essential cooking fuel - could not have come at a worse time. Adjusted monthly in line with international market trends, LPG prices witnessed the steepest single-month increase in the country's history in April.The surge has been driven by lingering war in the Middle East, which has disrupted global energy markets. Just last month, prices were set based on an import cost of $542 per tonne; this has now jumped to around $783. The country is almost entirely dependent on imports to meet the growing demand for cylinder gas. This heavy dependence on import makes domestic prices highly vulnerable to international shocks. However, when tough policy decisions become unavoidable, ensuring fair market practices becomes critical.

This is where the system is apparently failing. The irony of the LPG pricing mechanism is that even though the Bangladesh Energy Regulatory Commission (BERC) routinely fixes LPG prices, it appears to exercise little to no control over how these prices are implemented at the consumer level. For example, the 12 kg LPG cylinder, which is the most widely used, is now fixed at Tk 1,728 after a Tk 387 increase. But it is not available in the market at the government fixed rate. Even before the latest price adjustment, 12 kg LPG cylinders were being sold in the market at Tk 2,050 to Tk 2,200. There is no uniform pricing-while in some areas a 12 kg cylinder costs around Tk 2,000, in others it goes up to Tk 2,500. Retailers are charging as much as they can. Thus the government's LPG pricing framework has virtually become a cruel fun with the consumers already grappling with high inflation.

Over the last one decade or so, LPG has become an essential cooking fuel for millions of households across the country. As domestic natural gas reserves dwindle, authorities have been encouraging domestic use of LPG as an alternative. New residential gas connection has remained suspended for years, and is unlikely to resume in the foreseeable future. Even many households that still have pipeline connections are forced to keep LPG cylinders on standby, as stoves connected to the grid remain dry for the better part of the day. As a result, cylinder gas has become an essential part of daily life, from rural villages to major cities. However, the recent volatility in the LPG market, coupled with private sector dominance and rampant profiteering, has exposed how people have been made dependent on a commodity over which the government has no effective control.

For low- and middle-income families, the rising price of LPG is all the more painful. The latest hike will only intensify financial strain, particularly for those already struggling with the rising cost of essentials. The added cost frequently forces them to cut back on essential expenditures and reduce consumption in order to cope. The impact extends beyond households. As cooking fuel becomes more expensive, food prices in restaurants are also rising, adding another layer of pressure on consumers.

There is no denying the constraints the government faces. Global energy prices are volatile, and fiscal space is limited. However, even within these limitations, there is scope for more effective intervention. Measures such as fast-tracking the government-to-government (G2G) import, streamlining the local distribution channel and ensuring stricter enforcement of fixed prices could help shield ordinary people from the mounting inflationary pressure.​

 

[Saif]

The Financial Express | First Financial Daily of Bangladesh

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Tackling the energy crisis
It requires more than mobile courts and police

Rushad Faridi

Published :
Apr 05, 2026 00:20
Updated :
Apr 05, 2026 00:20

A vigilance team seized some drums of fuel, stored illegally at a hidden place in Sylhet last month —Agency Photo

It was entirely predictable that the onset of the Iran-Israel conflict would send shockwaves through the global energy market. With supply chains disrupted, particularly through the Strait of Hormuz, global crude oil prices have nearly doubled. Bangladesh imports roughly 95 per cent of its fuel, almost all of it from the Middle East. Consequently, for an import-dependent economy like ours, this regional war has rapidly escalated into a national crisis.

This crisis, however, is not unique to Bangladesh. Almost every nation relies on Middle Eastern energy to some degree, and our neighbours are grappling with similar challenges. Yet, compared to most of our neighbours, let alone the developed world, Bangladesh's economic resilience and energy security remain fragile. This underlying weakness makes the current shock far more severe for us.

Despite this, the government's response thus far lacks a sense of urgency. A month into the conflict, we have yet to see any meaningful adjustment in fuel prices. Even as international crude prices have skyrocketed, the domestic market remains insulated, standing in stark contrast to almost all other Asian nations, including our neighbours, which have already implemented price hikes.

THE COST OF UNSUSTAINABLE SUBSIDIES: To be fair, the government's reluctance is not entirely unfounded. A spike in fuel prices triggers inflation across the board, affecting everything from food to transportation. This disproportionately hurts low-income citizens. While shielding them is a valid goal, keeping prices artificially low across all sectors also subsidizes the affluent, leading to a massive waste of state resources. Ultimately, the burden of these colossal subsidies falls back on the ordinary taxpayer.

The sheer scale of this waste is staggering. Throughout March, diesel was sold domestically at 100 Taka per liter, while it cost the Bangladesh Petroleum Corporation Tk 189. Octane retails at Tk 120 against an actual cost of Tk 150. If this trajectory continues, the Energy Minister estimates the government will bleed an additional Tk 310 billion by June 2026. If this subsidy were exclusively targeted at low-income households, agriculture, or critical sectors, it might be justifiable. Under the current blanket system, however, it is entirely unsustainable.

REGIONAL COMPARISONS AND SMART RATIONING: This is why India's approach of sector-specific price adjustments is instructive. Rather than placing the burden directly on low-income earners, the Indian government selectively raised prices on premium fuels and bulk industrial supplies. State-owned oil companies increased premium fuel prices by Rs 2 to Rs3 per litre, while keeping standard petrol and diesel prices stable for everyday consumers. Essentially, those who can afford luxury vehicles bear the cost, protecting public transit and agriculture. Meanwhile, 'bulk diesel' sold to large industries and commercial enterprises saw a price hike of roughly 25 per cent.

Conversely, Pakistan, burdened by a severe foreign exchange crisis and strict IMF mandates, took a drastic route. Within a week of the war's outbreak, Islamabad hiked fuel prices by up to Rs 55 per litre, triggering a severe cost-of-living crisis and widespread public outrage. Bangladesh, too, is only just beginning to recover from the economic wreckage left by the previous Awami League administration. It is inevitable that we will not be able to freeze fuel prices for much longer. While we must avoid Pakistan's extreme shock therapy, we can adopt India's nuanced strategy: aligning the price of octane-predominantly used in private vehicles-with global markets, while capping increases on the diesel that powers our public transport and agricultural sectors.

Beyond market-driven pricing, there are innovative, non-market strategies to consider. Following its unprecedented economic collapse in 2022, Sri Lanka successfully leveraged technology to manage its fuel supply. They introduced the 'National Fuel Pass,' a QR-code-based digital rationing system that allocated weekly quotas for specific vehicle types. This initiative not only curbed hoarding but effectively eliminated the black market and the agonizing queues at gas stations.

Other nations are also adopting behavioural and administrative measures. Some are moving to four-day workweeks to conserve energy. In Thailand, office workers are encouraged to swap suits for t-shirts to reduce the need for air conditioning, alongside mandates to keep government office temperatures at 26-27 degrees Celsius. Vietnam has curtailed domestic flights and expanded 'work from home' policies, while large tech companies are urging employees to bring packed lunches to save the LNG used in corporate cafeterias.

THE LIMITS OF LAW ENFORCEMENT IN ECONOMICS: While Bangladesh has floated similar ideas, the government's primary strategy still relies on unsustainable subsidies and heavy-handed administrative crackdowns. Neither approach is viable long-term. Prolonged, massive subsidies will inevitably drain our national reserves. Meanwhile, to combat hoarding and artificial shortages, the government has deployed police force and mobile courts. Nearly 300 mobile courts are currently scouring the country, handing out fines and jail sentences for fuel hoarding.

Deploying law enforcement to police markets is a tired and ineffective playbook in Bangladesh. Whenever prices rise, the default narrative from authorities and the media is that a 'syndicate' of greedy businessmen is manufacturing an artificial crisis. The prevailing logic assumes that arresting these 'criminals' will magically stabilise prices. We saw this repeatedly during the Awami League era: police raids and harsh penalties aimed at controlling prices. Yet, every single time, these measures failed, often exacerbating the very crisis they sought to solve.

When a market faces a genuine supply shortage and the government enforces artificial price caps, the natural economic response is to hoard goods in anticipation of future price hikes. This inevitably fuels a black market where commodities are sold closer to their true, market-clearing value. Furthermore, if prices are significantly higher in neighbouring countries, it creates a powerful, lucrative incentive for cross-border smuggling.

These are fundamental economic realities that cannot be legislated or policed away. A genuine supply deficit is an economic problem; treating it as a criminal issue to be solved by law enforcement is fundamentally flawed. In fact, administrative coercion often breeds panic among suppliers, further constricting market availability. Sri Lanka's recent success clearly demonstrates that data-driven digital monitoring and rational demand management are vastly superior to the blunt force of police raids and mobile courts.

Moreover, Bangladesh's current policy of adjusting fuel prices just once a month is ill-suited for the present volatility. While a monthly review works in stable times, in a crisis where global prices fluctuate daily, it creates a massive incentive for speculative hoarding. Vendors naturally restrict sales at the end of the month, waiting for the anticipated price hike to maximise profits. This is a basic business strategy. To counter this, the government should transition to adjusting prices weekly-or even every few days-for specific fuels, as outlined earlier.

ESCAPING FOSSIL FUEL DEPENDENCY: Simultaneously, the country must look beyond immediate fire fighting and address the structural roots of our energy vulnerability. The primary reason Bangladesh is hit harder than its neighbours is its near-total reliance on fossil fuels. While India relies on fossil fuels for roughly 90 per cent of its needs, Pakistan 81 per cent, and Sri Lanka 77 per cent, Nepal has remarkably reduced its dependence to just 26 per cent.

Nepal and Bhutan are leveraging their geography and hydroelectric resources as a vital shield in this 2026 energy crisis. Rather than remaining shackled to imported oil, they are exporting surplus electricity to India and utilising the Indian grid to supply power to Bangladesh. This regional integration not only boosts their foreign exchange reserves but significantly cushions them against global oil shocks. By prioritising renewable energy, they are forging a sustainable security model that offers long-term dividends for the entire South Asian region.

In stark contrast, Bangladesh is lagging miles behind. Its 2008 renewable energy policy set an ambitious target of generating 10 per cent of our power from solar and other clean technologies by 2020. More than a decade and a half later, we are struggling to generate even 1 per cent from renewables. At that time, our geographical location positioned us as a potential powerhouse for solar energy. Tragically, under the extractive economic governance of the Awami League, those prospects were systematically dismantled.

To make matters worse, our domestic energy landscape has only deteriorated. The supply of natural gas from local fields has plummeted due to a glaring lack of state investment in exploration and extraction. To plug this growing deficit, the country began importing expensive liquefied natural gas (LNG) from the Middle East in 2018, alongside an increasing reliance on imported coal.

Cumulatively, these failures have left Bangladesh dangerously exposed to any disruption in the global energy market. We must treat this Middle Eastern conflict as a definitive wake-up call. If the newly elected BNP government can successfully navigate the short-term turbulence while decisively pivoting away from our crippling dependence on fossil fuels in the long run, this crisis may yet prove to be a blessing in disguise.

The writer is a Faculty, Department of Economics, University of Dhaka.​