[🇧🇩] Energy Security of Bangladesh

[Saif]

Severe energy crisis affects life, business

A severe energy crisis has been affecting every aspect of life, commerce and business as the country passes yet another year of bad energy planning.

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Severe energy crisis affects life, business
Industries report big drop in production, people suffer at home

Emran Hossain 28 April, 2025, 23:27

A severe energy crisis has been affecting every aspect of life, commerce and business as the country passes yet another year of bad energy planning.

While industries are left with no choices but to reduce production by half or even more due to long hours of power cuts, compounded by a severe shortage of gas, power plants sat idle in dozens, CNG refueling stations saw long lines of vehicles and many households needed to wait until midnight to cook meals.

The crisis is a grim reminder of the interim government’s failure to import enough energy as it continues to carry the energy sector debt burden left behind by the past Awami League regime amid the dollar crisis.

On April 27, the latest daily gas report released by Petrobangla showed that the overall gas supply stood at 2,692.2mmcfd against the demand of 4,000mmcfd. The gas supply was 10 per cent less compared with the same day a year before.

An analysis of daily Petrobangla reports of the days in comparison revealed that gas production from domestic wells fell by 170.9mmcfd amid reduced liquefied natural gas imports of 159mmcfd.

‘We are witnessing the worst energy crisis ever,’ said Bangladesh Knitwear Manufacturers and Exporters Association vice president Saleudh Zaman.

About 19 per cent of about 1,800 textile mills are running at their half or 40 per cent capacity navigating seven to nine hours of power cuts daily, he said.

Industries could not use their alternative captive power generation because of gas supply shortage. Many industries need gas as raw materials.

‘Many factories might default on paying workers’ wages,’ he said.

Gas accounts for 54 per cent of Bangladesh’s total energy supply. The other energy sources are oil, coal and biomass. Power sector is the biggest gas consumer accounting for 43 per cent of the overall consumption. Captive power consumes 17 per cent of gas.

Industries use 18 per cent of supplied gas while households use 11 per cent and CNG and fertilizer production use 5 per cent each.

On April 27, gas supply met 42 per cent of power sector demand and only 38 per cent of fertilizer sector demand.

Consumers are particularly angered by the gas crisis because their gas bill soared in the past few years without any improvement in its supply. Industries saw gas price increase by more than two and a half times since 2023.

Over the past week, the crowd of vehicles at CNG refueling stations in the capital and many other districts got thicker, signaling a worsening turn in the energy crisis.

The gas pressure, supposed to be 15psi, dropped to between zero and 2psi in two-thirds of CNG refueling stations, said Farhan Noor, general secretary of the Bangladesh CNG Filling Station and Conversion Workshop Owners Association, a platform of 539 refueling stations.

The refueling stations never received the promised pressure and faced gas rationing since 2010.

Though the stations are supposed to get gas 21 hours a day, the supply reaches operable levels around midnight.

‘The problem is that you cannot find customers in the wee hours,’ said Farhan.

Low gas pressure means increased energy cost for the refueling stations which need to use three to five times more electricity to run their compressors to get a certain amount of output, he explained.

Farhan said that he was under pressure from his colleagues to call a nationwide strike as their margin dropped over the years amid inflation, wage hike, and the devaluation of taka.

‘I lost a long-time client today as I was two hours late to pick him up due to long queues at gas refueling stations,’ said Abdul Malek, a rent-a-car owner in Tangail.

The drop in the gas supply in CNG refueling stations mirrored lives in households relying on piped gas. Many households have to wait until midnight to start cooking.

‘Cooking at midnight after working a whole day is simply inhuman,’ said Hamida Banu, a housewife in the capital’s Badda area.

Most households using piped gas pay a fixed monthly price though they never get what they pay for. Households in many areas in Dhaka reported acute low gas pressure in most parts of the day.

The shortage of gas is felt more than any other energy shortage as public infrastructures are mostly gas-based. Coal and furnace oil are mostly used in industries and power production.

Petrobangla director Rafiqul Islam said that the crisis was unlikely to improve until June when the state-owned oil company is planning to increase LNG import.

‘Local gas production fall and increased power demand are the main drivers of the crisis,’ he said.

This summer has been rather less warm as the warmest month of the year, April, is about to end with maximum day temperatures remaining around 37C. Last April saw consecutive days spread over weeks with temperatures exceeding 40C over vast swathes of land.

Still, frequent load shedding occurred, even in Dhaka.

At 1:00am on April 28, 218MW of load shedding was recorded when the power demand rose to 15,240MW. Bangladesh’s current installed power generation capacity is over 27,500MW with gas accounting for nearly half of the capacity. Coal and oil account for 20 per cent of the capacity each.

Energy expert Ijaz Hossain advised increasing gas supply to industries even if it meant increasing load shedding. He called for prioritizing some industries to supply 200mmcfd of extra gas, which could go a long way in saving the country’s economy.

‘The crisis reflected shortcomings of energy planning,’ he said, ‘I don’t understand what the government is trying to achieve by not fully using its LNG import capacity.’

Bangladesh’s full LNG import capacity is 1,100mmcfd.

Oil-based power plants could be used more to mitigate power outages, he suggested.

‘There is no easy solution. We are facing a critical situation. Further failure in taking the right action could lead everything to collapse,’ said Ijaz.​

 

[Saif]

No margin loan for power sector

The taskforce for capital market reforms has suggested excluding power plants from the list of marginable securities as their nature of having fixed tenures makes them more aligned with bonds..The taskforce submitted its final proposals to the Bangladesh Securities and Exchange Commission

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No margin loan for power sector
Taskforce says in final proposal for capital market reforms

The taskforce for capital market reforms has suggested excluding power plants from the list of marginable securities as their nature of having fixed tenures makes them more aligned with bonds.

The taskforce submitted its final proposals to the Bangladesh Securities and Exchange Commission on Sunday before disclosing them to the media through a press briefing at the regulator's office in Dhaka today.

It previously submitted a draft proposal in February, where it proposed that power plants with limited lifecycles should not qualify for margin financing during the last two years before their expiry.

According to the final proposal, mutual funds as a group should be non-marginable. Also, the marginable limit of banks and financial companies should be linked with their net asset value, not earnings.

This is because the valuation of banks and financial institutes are ideally linked to their net asset value and return on equity.

If a client has two accounts, with one being a margin account while the other is a non-margin account, and the margin account goes negative, the institution should have absolute discretion to sell from the non-margin account to repay the negative amount.

Also, clients should be required to pay interest against their margin loans within 15 days of the expiry of the notice period.

If left unpaid, brokerages should have the right to liquidate holdings to recover outstanding interest.

Meanwhile, considering how margin loan products are different from regular loan products, it proposed not including defaulters of margin loans in the Credit Information Bureau (CIB) report.

The assessment of earning, collateral and so on is different for margin loans. Besides, merchant banks and stockbrokers do not have access to the CIB database, the taskforce said.​

 

[Saif]

Rising gas prices threaten our investment prospects

The previous government not only turned the country into a net importer of energy, but also initiated a process to make it an import-dependent.

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Rising gas prices threaten our investment prospects

VISUAL: ANWAR SOHEL

On April 13, 2025, despite objections from businesses and consumer rights organisations, the Bangladesh Energy Regulatory Commission (BERC) set new gas prices for new industries, raising the tariff from Tk 30 to Tk 40 per unit. For captive power plants, the tariff has been increased from Tk 31.50 to Tk 42 per unit. This increased rate will also apply to existing customers if they use more than 50 percent of their approved load.

At a time when the government has presented the country as an attractive destination for global business through the Bangladesh Investment Summit 2025, this gas price hike has caused concern among industrial consumers who are worried about investments getting stalled by increased gas prices. A business leader pointed out that the method used to determine gas prices was flawed; VAT is being imposed at both the import and distribution stages. Meanwhile, gas theft continues without effective measures to prevent it. Instead, to cover the losses, the gas price is being increased, he remarked.

This differential pricing has caused discrepancies in energy costs for similar operations, disrupted the level playing field, and weakened national competitiveness in industrial sectors—posing a threat to both domestic and foreign investments. A transparent and fair energy pricing is essential to maintain investor confidence and ensure industrial growth. The said BERC order to increase gas prices is inconsistent with the goals of economic development and attracting investment. No effective initiatives have been taken to explore our own gas resources. Instead, the government has become overly dependent on LNG imports, which primarily benefit an oligarchic class. One of the core foundations for attracting foreign investment is energy security. Repeated abnormal hikes in gas prices disrupt energy security and create uncertainty in investment security.

In Bangladesh, the ratio of private investment in terms of GDP, which has been historically underwhelming, is now on the decline. In FY2021-22, the private investment to GDP ratio was 24.52 percent. By FY2023-24, it fell down to 23.96 percent, according to a Prothom Alo report. In the first six months of FY2024-25, foreign direct investment in the country amounted to only $213 million, a significantly lower amount than the $744 million during the same period the previous fiscal year. If investment cannot be increased, employment will decline, people's income will decrease, and young people will not get the jobs they hope for.

Statistics on private bank loans and the import of capital machinery also reflect stagnation in investment. In February 2025, private sector credit growth dropped to 6.82 percent—the lowest in the past 10 years. Between July 2024 and February 2025, capital machinery imports shrunk by nearly 25 percent. The main issue is the lack of energy security, which is making the investment environment unfavourable. To address the gas crisis, the government, in 2023, raised industrial gas prices by up to 178 percent while promising increased LNG supply. Yet, the crisis remains unresolved. In January, Petrobangla proposed to raise gas prices for industries by 152 percent, aligning the rate with the cost of LNG supply.

System loss in gas distribution and transmission is 13.53 percent. However, according to BERC's own estimates, it is just 1.12 percent—the rest is due to wastage and theft. As I have mentioned before, if the value of these losses were not adjusted into the pricing, around Tk 10,870 crore of taxpayers' money could have been saved annually.

VAT is being charged twice in gas pricing. The BERC technical committee recommended charging VAT only once, which would reduce annual predatory expenses by approximately Tk 3,548 crore. In contrast, a 33 percent hike in gas prices for industrial and captive power use is expected to generate only about Tk 713 crore in additional annual revenue.

These figures clearly demonstrate that simply making VAT and system loss fair and reasonable could prevent predatory expenses, potentially saving Tk 14,418 crore annually. Yet, instead of eliminating these predatory costs, BERC has arbitrarily raised industrial gas prices under a separate gas pricing structure—beyond its jurisdiction.

Domestic gas supply in FY2022-23, FY2023-24, and FY2024-25 was 22,651, 21,082, and 20,067 (projected) million cubic metres, respectively. This consistent decline indicates a deepening energy crisis. Currently, LNG accounts for 25 percent of the total gas supply—a figure projected to rise to 75 percent by 2030. In light of this, the government is now determined to sell gas to industrial consumers at the LNG rate of Tk 79.34 per cubic metre. Meanwhile, all charges related to energy supply are being raised to abnormal levels.

After gaining power for pricing, the previous government increased gas production, transmission, and distribution charges by approximately 40 percent, 114 percent, and 60 percent, respectively, within a year. The charges of Petrobangla and Rupantarita Prakritik Gas Company Ltd (RPGCL) were raised by 24 percent and 109 percent, respectively. The gas price was increased by 150 percent, 155 percent, and 178 percent for large, medium, and small and cottage industries, respectively. For captive power, the increase was 97 percent, and for electricity, it was 209 percent. Under the current government, a 33 percent hike has already been implemented. In this context, BERC stated that gas distribution companies had proposed raising prices by over 150 percent for new industries, but acknowledged that such a jump would be too difficult to bear at this moment.

In the public hearing held in 2022, it was revealed that 65 percent of the Gas Development Fund remained unspent. Only 35 percent was used to pay foreign contractors. National capacity development was not prioritised. As a result, 75 percent of gas supply is projected to come from LNG by 2030. This trend remains unchanged under the current administration.

Earlier on February 13, 2025, the Consumers Association of Bangladesh (CAB) sent a letter to BERC. In a press conference on February 22, CAB proposed postponing the public hearing on gas price hikes and reducing energy prices by eliminating predatory expenses. During the hearing held on February 26, CAB recommended rejecting the unjust and unreasonable gas price hike proposal. In the post-hearing report dated March 4, the following recommendations were forwarded:

i) Under the amended Section 34 Ka of the BERC Act, all pricing orders issued by the ministry concerning energy should be revoked, and new prices should be set by BERC.

ii) The total amount of predatory costs adjusted into energy pricing during the previous government's tenure should be determined, and existing rates should be reduced by excluding such costs and excessive government revenue.

iii) A tribunal led by a retired Supreme Court judge should be formed to bring energy criminals to justice.

iv) The BERC Act should be amended to ensure energy justice and protect consumer rights.

v) A reform commission under BERC, comprising stakeholder representatives, should be formed to restructure the energy sector, ensuring affordability and availability for consumers.

BERC did not respond at all to these proposals. Instead, it showed particular interest in aligning industrial gas pricing with the high cost of LNG, leading to discriminatory pricing.

It indicates that the previous government not only turned the country into a net importer of energy, but also initiated a process to make it an import-dependent market for industrial goods. Is the current government going to continue following the same trajectory?

M. Shamsul Alam is energy adviser at the Consumers Association of Bangladesh (CAB), and professor of electrical and electronic engineering at Daffodil University.​

 

[Saif]

Govt should try all means to plug energy supply gap

A POOR state of the energy sector — where industries almost halve their production, power plants sit idle by the dozens, queues grow longer at filling stations and households wait until midnight to cook meals all because of constraining inadequacy in energy supply, especially gas — has come to...

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Govt should try all means to plug energy supply gap
30 April, 2025, 00:00

A POOR state of the energy sector — where industries almost halve their production, power plants sit idle by the dozens, queues grow longer at filling stations and households wait until midnight to cook meals all because of constraining inadequacy in energy supply, especially gas — has come to be a grim reminder of a bad energy planning of the interim government, which additionally continues to carry the problems in the sector that the Awami League regime left it with. The government failures keep affecting every aspect of life. The daily gas supply report that Petrobangla released on April 27 shows that the overall supply stood at 2,692.2mmcfd against the demand for 4,000mmcfd, meeting only 32.69 of what is estimated needed. The supply is 10 per cent less compared with the supply on the same day a year before. An analysis of Petrobangla reports show that gas production from domestic wells has fallen by 170.9mmcfd amidst a reduced liquefied natural gas import of 159mmcfd, which the government is struggling to attend to because of a dollar shortage.

Gas accounts for 54 per cent of the total energy supply, with other sources being oil, coal and biomass. And, the power sector is the biggest consumer of gas, accounting for 43 per cent of the overall consumption whilst captive power generation consumes 17 per cent of the gas, industries 18 per cent, households 11 per cent, and compressed natural gas and fertiliser production 5 per cent each. On April 27, when the gap between the supply and the demand stood at 1,307.8mmcfd, the day’s gas supply could meet 42 per cent of the demand of the power sector and only 38 per cent of the demand of the fertiliser sector. Industrial consumers, many of which cannot depend on captive power generation because of the supply shortage and many that use gas as raw materials have halved their production, resented low gas pressure, which remains in the ranges of 0–2 pounds per square inch against the standard 15 pounds per square inch. Consumers generally resent the poor or no supply as gas prices have soared in the past few years, more than two times and a half since 2023, without any improvement in the supply situation. What makes all this concerning is that a Petrobangla director says that the situation is unlikely to ease until June when the state-owned agency plans to increase the import of liquefied natural gas.

The government should, therefore, anyhow increase gas supply by importing liquefied natural gas and diverting some gas from other sectors to industries. It could also use oil-based plants more to mitigate the power supply shortage. A further failure could make industries hurtle to a disaster.​

 

[Saif]

How the power and energy sector can come out of constant financial crunch

The sector has faced prolonged financial losses, rising public debt, and increasing fiscal burdens.

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How the power and energy sector can come out of constant financial crunch

FILE ILLUSTRATION: BIPLOB CHAKROBORTY

The Centre for Policy Dialogue (CPD) has put forward a set of recommendations targeting the national budget for FY2025-26, especially with regard to the power and energy sector. There are grave concerns about the sector since it has confronted a vicious cycle of financial crunch over the last several years, which is likely to continue in the next fiscal year unless necessary measures are taken by the Ministry of Power, Energy and Mineral Resources (MoPEMR) and Ministry of Finance (MoF).

The power and energy sector has faced prolonged financial losses, rising public debt, and increasing fiscal burdens due to faulty policies, lack of transparency, and weak governance during the previous regime. Key challenges include: a) defaults on import bill payments; b) repayment of international loans and dues to international companies; c) disrupted gas and electricity supply; d) a lack of domestic gas exploration; and e) a growing subsidy burden passed onto consumers via higher tariffs. The upcoming national budget should focus on paying off outstanding dues, reducing subsidies, prioritising domestic gas exploration over LNG imports, lowering tariff barriers for renewable energy components, and eliminating discriminatory fiscal benefits for fossil-fuel-based power generation. As of February 2024, the Bangladesh Power Development Board (BPDB) has an overdue payment of Tk 29,000 crore, with Tk 21,000 crore owed to locally owned independent power plants (IPPs) and Tk 8,000 crore to foreign-owned IPPs, including Adani Power Jharkhand Ltd. Similarly, Bangladesh Oil, Gas and Mineral Corporation, also known as Petrobangla, faces outstanding dues for LNG and coal imports. To address this, the finance ministry plans to clear all arrears within the current fiscal year by reallocating unused ADP funds and raising the power sector subsidy to Tk 62,000 crore. However, this approach highlights a troubling cycle of overdue loans, unpaid bills, and ongoing financial liabilities in the power and energy sector.

Macroeconomic concerns

Fiscal policies directly impact macroeconomic performance. However, one major mistake and overlooked issue of the previous regime was failing to consider the broader macroeconomic context while injecting substantial funds into the power and energy sector, without addressing the effects of rapidly increasing money supply. This sector has been one of the highest recipients of subsidies, contributing to a weak macroeconomic foundation and rising price levels that persist today.

While subsidies may lower energy prices for consumers, they inadvertently increase the overall money supply, raising demand for power and contributing to demand-pull inflation. This inflationary pressure, driven by more money in the economy and artificially low prices, causes general price levels to rise.

Conversely, reducing subsidies would lead to higher prices for consumers at both household and production levels, also contributing to inflation but with different consequences. In this case, the government's fiscal burden would decrease, potentially alleviating pressure on public finances. However, reducing subsidies could also increase the fiscal deficit, adding pressure to inflation. The reality is, there is no straightforward solution; decisions must balance controlling inflation, reducing fiscal deficits, and reallocating subsidies for long-term sustainability in the sector.

Five-year financial recovery plan needed

To break the cycle, the MoPEMR, particularly BPDB and Petrobangla, should design a five-year financial plan to gradually reduce overdue payments. This plan should phase out fossil-fuel-based power plants after current contracts end, removing the "capacity payment" clause from renewed power purchase agreements (PPAs) and new contracts. In the short term, the MoPEMR should work with the finance and planning ministries to allocate additional funds as loans to BPDB and Petrobangla to clear overdue payments. These funds could come from ministries with poor fund utilisation records. The MoPEMR should also coordinate with the finance ministry to secure foreign exchange to clear overdue payments to foreign companies and projects, with the finance ministry and the Economic Relations Division (ERD) negotiating with multinational development banks like the International Monetary Fund (IMF), World Bank, and Asian Development Bank (ADB) for budget support. Additionally, the MoPEMR must present a medium-to-long-term financial sustainability plan.

Developing domestic gas sector is crucial

Despite the plan to drill 35 gas wells across the country by 2025, only one has been drilled so far. While three key projects have been approved and eight new projects are proposed for survey, exploration and extraction of hydrocarbons to boost gas reserves, the number of ongoing and planned projects remains too small to meet the exploration target. To address this, Petrobangla should expedite the explorations of gas wells using its own gas development fund instead of relying on foreign bidders. The Bangladesh Petroleum Exploration and Production Company Limited (BAPEX) can take loans to allocate resources for the exploration of the 10 gas wells, scheduled to be explored using rented rigs. Since supplying energy is one of the topmost priorities for the national economy, the MoPEMR should discuss the necessary allocation of resources for ADP projects on the development of gas fields with the planning ministry.

Such a slow pace of gas exploration, coupled with prompt initiatives to import liquefied natural gas (LNG) continuously from the spot market, has raised concerns regarding the government's commitment to reduce energy import dependency. To address this, the government should start deprioritising LNG imports. In this context, the recent deal signed with the US for LNG supply could undermine the efforts to explore domestic gas resources. Instead, the government may consider welcoming US-based companies to submit their proposals for gas exploration in the off-shore fields.

Reducing import tariffs, other duties for green energy transition

One significant barrier to attracting private and public investment for green energy transition and attaining self-sustenance is the high tariff structure imposed on the import of essential renewable energy components. The total tax incidence on these imported components consists of multiple layers, such as customs duty, supplementary duty, advance income tax, advance tax, and value-added tax (VAT), significantly raising the costs. The overall impact of these tariffs is twofold: a) they increase the capital expenditure for renewable energy projects; and b) they slow the adoption of clean energy technologies due to higher financial barriers. For example, the total tax incidence imposed on solar panels is 26.2 percent, solar inverters 37 percent, mounting structures 58.6 percent, lithium-ion batteries 58.6 percent, and lead-acid batteries 89.32 percent. Additionally, other key renewable energy technologies such as wind, hydro, geothermal, and biomass-based power generation rely on imported equipment and components that are subject to similarly higher import duties and tax incidence. Similarly, electric vehicles face higher tax incidence. In contrast, the tax incidence is much lower for equipment and other components of fossil-fuel-based power generation.

Custom duties on parts, equipment, and components related to renewable energy supply chains, including generation, transmission, and distribution, should be reduced to five percent. The government should also eliminate taxes on all renewable energy goods to reduce costs and boost wider adoption of renewable energy technologies. Such measures would have only a marginal impact on the government's aggregate revenue generation. Also, VAT on parts, equipment, and components related to renewable energy supply chains should be reduced from 15 percent to 10 percent. In addition, a dedicated Renewable Energy Development Fund should be established to provide financial support for facilitating the establishment of distributed renewable energy systems, under private and commercial solar, wind, and biomass production units. To improve access to clean energy in remote and underserved regions, development funds should be allocated for mini-grid solar, battery storage technologies and wind projects.

Withdrawing benefits for fossil-fuel-based power

Addressing the fiscal benefits provided to fossil-fuel-based power producers is crucial for creating a level playing field for renewable energy producers. Under the Private Sector Power Generation Policy, fossil-fuel-based power plants receive significant tax exemptions, including a 15-year corporate income tax holiday, exemptions on plant and equipment imports, and full customs duty exemptions on imported fuel. The companies are allowed to import plant and equipment and spare parts up to a maximum of 10 percent of the original value of total plant and equipment within 12 years of commercial operation without payment of customs duties, VAT, and any other surcharges. The exemption includes paying import permit fees, except for indigenously produced equipment manufactured according to international standards. For imported fuel, there is full exemption of custom and import duties, and five percent VAT on the imported fuel as it will be used for the power generation process. These advantages have skewed the power sector, making it difficult for renewable energy producers to compete.

To rectify this, the Power Division should work with the National Board of Revenue (NBR) to remove corporate tax exemptions for fossil-fuel-based power plants in upcoming projects. A minimum five percent customs duty and surcharge should be imposed on the import of machinery and steel structures for fossil fuel plants. The Power Division should also review and compare the fiscal benefits given to fossil fuel plants with those for renewable energy producers, taking steps to eliminate discriminatory advantages. The MoPEMR, Power Division, Bangladesh Energy Regulatory Commission (BERC), and Sustainable And Renewable Energy Development Authority should collaborate with the finance ministry and NBR to withdraw these measures, reducing government fiscal expenditure and generating additional revenue.

Dr Khondaker Golam Moazzem is research director at the Centre for Policy Dialogue (CPD).​