The burden of subsidies in Bangladesh’s power sector has risen sharply due to policy failures, lack of transparency in contracts, and high operational costs during the previous Awami League government. According to a recent updated report from the Power Division, subsidies in the sector have increased by nearly seven times, or 633 percent, over the past seven years. This rising financial pressure is now expected to continue affecting future administrations, including the interim government and a potential BNP-led government.

Rising Subsidy Trend

The report shows a continuous and steep increase in subsidies over recent fiscal years:

• FY 2020–21: BDT 8,945 crore
• FY 2021–22: BDT 11,963 crore
• FY 2022–23: BDT 23,000 crore
• FY 2023–24: BDT 33,000 crore
• FY 2024–25: approximately BDT 62,000 crore
• FY 2025–26 (projected): BDT 62,964 crore
• FY 2026–27 (projected loss/subsidy): BDT 65,555 crore

Officials note that the subsidy has increased mainly due to inefficient management, high capacity payments, irregularities in power purchase agreements, and the purchase of electricity at high prices while selling it at lower rates.

In addition, the global energy crisis, particularly fuel price increases driven by Middle East instability, has further worsened the situation.

Economic Impact

Energy sector stakeholders highlight that the current subsidy level is equivalent to the cost of approximately one and a half years of the national health budget or two and a half years of the agriculture budget.

According to the Ministry of Finance, the current allocation for the health sector is BDT 41,908 crore, while the agriculture sector receives BDT 27,224 crore.

Role of Capacity Payments

Analysts identify capacity payments as one of the major reasons for the growing losses in the power sector. Independent power producers are being paid under contractual agreements even when their plants are not generating electricity.

This expense has already exceeded BDT 100,000 crore, and reportedly accounts for nearly 81 percent of total electricity subsidies.

Other Contributing Factors

The shortage of domestic natural gas has forced increased reliance on imported liquefied natural gas (LNG) and diesel-based power generation, significantly raising production costs.

The depreciation of the Bangladeshi taka against the US dollar and rising fuel import costs have further increased overall expenses. System losses, illegal connections, and underinvestment in domestic gas exploration have also contributed to the financial strain.

Power Generation and Imports

Substantial subsidies are being required for electricity generated from state-owned plants, private producers, joint-venture coal plants, and imported electricity from India and Nepal.

High-cost electricity imports, particularly from sources such as Adani Power’s Jharkhand project, have further increased government expenditure.

Expert Concerns

Experts argue that exemption-based approvals under indemnity laws, excessive installed capacity, and non-transparent agreements have significantly increased losses in the sector.

They warn that without urgent structural reforms, the growing subsidy burden in the power sector could pose a serious risk to the national economy in the coming years.