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Despite ongoing instability in the energy and power sector caused by extensive import dependency, USD crunch and repeated price hikes, Finance Minister Abul Hassan Mahmood Ali has not presented a roadmap to resolve this crisis in the proposed national budget for FY25.
Instead, he proposed plans to expand energy imports, which will require significant USD expenditure.
In the budget presented to the parliament on Thursday, Mahmood Ali mentioned the construction of several terminals for the costly import of an additional 2,000 MMCFD of LNG. However, experts have repeatedly warned that reliance on imported fuel poses significant economic risks to the country.
In his first budget speech, Mahmood Ali highlighted the development of the power and energy sector under the Awami League government. However, he also pointed out a notable exception this time: the allocation for the power and energy sector has been reduced by approximately Tk 4,500 crore compared to the previous fiscal year.
The proposed new budget allocates Tk 30,317 crore for the power and energy sector while the allocation was set to Tk 34,819 crore in FY24. Although the annual expenditure in the power and energy sector has been increasing, the finance minister did not explain why the allocation was reduced.
Sector sources believe that the allocation was reduced based on advice from the International Monetary Fund (IMF).
There are plans to increase electricity prices four times a year to reduce subsidies and gas prices may also increase similarly. These factors likely led to the reduced allocation, a source from the Bangladesh Power Development Board confirmed to The Business Post.
In the budget speech, Mahmood Ali said that utmost priority has been given to the development of the power sector. “The government has brought 100 per cent of the population under the electricity coverage,” he said adding that the power generation capacity is now at 30,277 MW. However, there are plans to increase the power generation capacity to 40,000 MW by 2030 and 60,000 MW by 2041,” he added.
According to the speech, by 2041, 40 per cent of the total electricity production is targeted to come from renewable sources. Additionally, to encourage the development and use of renewable energy, Abul Hassan Mahmood Ali proposed a special allocation of Tk 100 crore.
Besides, in consideration of the importance of offshore mineral resource extraction, an allocation of Tk 100 crore for research and development activities of the Blue Economy Cell, working under the Energy and Mineral Resources Division, has been proposed by Mahmood Ali.
The finance minister said that to make the existing “Offshore Model- PSC 2019” more attractive, the Bangladesh Offshore Model Production Sharing Contract (PSC)- 2023 has been formulated. Under this, the “Bangladesh Offshore Bidding Round-2024” has commenced to appoint international companies for oil and gas exploration and extraction in nine blocks of shallow sea and 15 blocks of deep sea. To meet the country's fuel oil demand, the ERL Unit-2 project has been undertaken to increase the refining capacity of Eastern Refinery Limited from 1.5 million tonnes to 4.5 million tonnes.
Meanwhile, the finance minister said that a contract signing is underway to supply 500 million cubic feet of LNG per day to the Payra Port area. The establishment of a land-based LNG terminal with a capacity of 1,000 million cubic feet per day is also in progress at Matarbari in Cox's Bazar.
