The interim government is considering issuing additional special treasury bonds to help the Bangladesh Power Development Board (BPDB) settle its outstanding payments to independent power producers (IPPs).
The move is intended to ease the financial burden on independent power producers and maintain stability in the country’s power sector, in line with policies pursued by the previous government.
The BPDB has accumulated outstanding dues of Tk 5,645 crore to IPPs since August 2023. The previous government had earlier issued special treasury bonds worth Tk 6,565 crore for the power sector in the current fiscal year 2024-25. Despite this, the dues continue to accumulate, according to sources within the Power Division.
Debt breakdown
Currently, BPDB's total outstanding bills stand at around Tk 42,000 crore, of which over Tk 6,500 crore is owed to IPPs. The remainder includes approximately Tk 17,000 crore in gas bills, Tk 10,000 crore owed to state-owned power plants, and payments due to India’s public and private sector entities, including the Adani Group.
Sources indicate that private power plants are struggling to meet their financial obligations due to the government's inability to release subsidy funds. This has left some operators on the brink of bankruptcy.
The unpaid dues for purchasing electricity from IPP power plants under BPDB since August 2023, as well as details regarding loans taken from banks to offset these dues for the fiscal year 2024-2025, have been sent to Finance Division Secretary Dr Md Khairuzzaman Mozumder, according to sources.
Previous bond issuance
Earlier, the ousted Awami League government had raised Tk 20,620 crore through the issuance of special bonds aimed at stabilising the power sector. This initiative involved City Bank and Pubali Bank and was intended to clear outstanding liabilities owed to private power producers.
In February of the current fiscal year, the Awami League government issued Tk 10,594 crore in special treasury bonds specifically for the power sector. This was done to pay off unpaid liabilities owed by banks and power companies that were facing financial difficulties.
At that time, the Finance Division issued special treasury bonds amounting to Tk 6,565.0573 crore to 24 banks, based on claims made by the institutions involved.
Bond terms, interest and repo rates
The government typically issues 20-year bonds, but in this case, the tenure of the special bonds was decided through negotiations with the banks. Different bonds were issued with different terms, ranging from eight to ten years, depending on the agreements with the respective banks.
Since June 2023, the Ministry of Finance has been issuing bonds in phases to 40 banks, totalling Tk 25,500 crore, to settle debts in the power and fertiliser sectors.
According to ministry officials, the interest rate on these bonds has been set at 8 per cent, which aligns with the repo rate set by Bangladesh Bank. They added that future fluctuations in the repo rate would be reflected in the bond’s interest rate.
Decline in subsidies
In the fiscal year 2022-2023, total subsidies for the power sector amounted to Tk 42,893 crore. Following multiple electricity price hikes last year, the subsidy requirement for the sector began to decrease.
In 2022, the power sector required over Tk 4,000 crore in subsidies each month, which has since dropped to approximately Tk 3,000 crore per month.
Officials from the Finance Division also stated that the government has cleared outstanding electricity subsidies up to October of last year.
Sources from the Bangladesh Independent Power Producers' Association (BIPPA) said that IPP operators were receiving only 25-30 per cent of the monthly bills submitted to BPDB for electricity purchases.
Unpaid subsidies, bank debts
As of June, outstanding subsidies in the power and fertiliser sectors amounted to nearly Tk 42,000 crore. Of this, debts owed by fertiliser importers and power companies to 40 public and private banks stood at approximately Tk 25,500 crore.
The debts of power producers to banks alone reached around Tk 15,000 crore, while fertiliser importers owed a total of Tk 10,500 crore to banks.
