Bangladesh is increasing more electricity generation capacity than it needs, but people still experience frequent load-shedding because of the slow progress of transmission lines and distribution systems, according to the Centre for Policy Dialogue (CPD).
As a result, although there is overcapacity, electricity is not reaching everyone and this mismatch is costly, said the non-government think tank.
CPD shared the analysis at a post-budget dialogue, titled “Power and Energy Sector in the National Budget FY2025: Can the Proposed Measures Address the Challenges?”, held at the BRAC Centre Inn at Mohakhali in Dhaka on Sunday.
CPD Research Director Khondaker Golam Moazzem moderated and presented the keynote. Faridpur-3 Independent MP AK Azad attended the event as the special guest while Power Cell Director General Mohammad Hossain was present as the guest of honour.
The government paid a total of around Tk 1,05,000 crore in 14 years as capacity payments to power plant owners up to August 2023, according to the state minister for power, energy and mineral resources.
CPD pointed out that Bangladesh Power Development Board’s (BPDB) net loss in FY2024-25 will be Tk 18,106.3 crore due to non-revenue expenses such as capacity charges.
Moazzem said, “The budget for the next fiscal year is promoting anti-transition and anti-sustainable measures, by supporting coal-based electricity generation and setting unnecessary ambitious power demand targets.
“The net loss will have to be managed through subsidy or debt or both, which remains a concern whether the institution has enough financial depth to facilitate such a huge net loss through debt.”
Following the net loss, BPDB’s debt-equity ratio will be 111:-11 in FY25, which implies that for every 100 units of equity, it has 111 units of debt — effectively making the equity negative. This reflects severe financial distress and an unhealthy level of debt.
Moazzem said, “As of May 31, 2024, Bangladesh's installed electricity generation capacity is 30,738 megawatts [MW], with 27,515 MW on-grid and 3,223 MW off-grid. According to the CPD, electricity demand will reach about 19,377 MW by 2030.
“Natural gas has remained the main energy source for power generation (11,859 MW or 38.6 per cent), followed by fuel oil (7,069 MW or 23 per cent) and coal (5,107 MW or 16.6 per cent) while renewable-based power plant capacity remains low at 1,374 MW (4.5 per cent).”
M Shamsul Alam, energy adviser of the Consumers Association of Bangladesh (CAB), said, “The government has utterly failed to achieve its two goals of providing electricity to every household and eliminating load shedding. The name of the price adjustment has been automatically changed to cropping adjustment.
“Bangladesh Petroleum Corporation is deeply mired in corruption and the state has allowed this. Price increases and deficit increase are not development. Consumers are panicking. An allocation of Tk 30,317 crore to this sector will increase the deficit.”
CPD recommended that it required very distinctive fiscal measures including fossil fuel phase-out, the retirement of quick rental power plants, ending capacity payments, and incentivising renewable energy through fiscal measures.
Moazzem added, “The budget needs to extend tax holidays from five years to 10 years for renewables-based power plants, provide 100 per cent duty waivers to small-scale solar-based projects, and lower the cumulative tax rate on solar power-related accessories.”
“Also the government should prioritise domestic gas exploration rather than import LNG. Besides, the priority should be focusing on improving BPDB’s debt-equity ratio. But without proper planning, allocation, implementation and monitoring, both energy sustainability and energy transition will not be achieved,” he said.
MP AK Azad said, “Tariff hikes on energy imports, capital machinery will weigh on traders. According to the central bank data, till June 20, the import of capital machinery decreased by 24.68 per cent, intermediate goods by 10 per cent, and raw material by 22 per cent, which is not good news for the manufacturing industry.”
