Bangladesh spends the highest per capita on power subsidies among neighboring countries, yet its per capita electricity usage ranks second to the last.
This insight comes from an analysis by the Bangladesh Independent Power Producers Association (BIPPA), presented to senior government officials on Monday at Rail Bhaban.
The analysis reveals that in the fiscal year 2023-24, Bangladesh allocated $18.53 per capita for power subsidies. This figure surpasses India’s $14.29, Pakistan’s $8.74, and Vietnam’s mere $0.0431. Meanwhile, Sri Lanka eliminated power subsidies entirely in 2023.
Despite this significant spending, Bangladesh’s annual per capita electricity consumption stands at 553 kilowatt-hours (kWh), placing it just above Pakistan, which ranks last.
Residential Dominance in Electricity Use
The report highlights that over 56% of Bangladesh’s electricity is consumed by residential users, the highest proportion among its regional peers. In contrast, industrial and commercial users account for about 39% of total consumption, the second-lowest share in the region after Pakistan.
Causes Behind the Growing Subsidy Burden
Economists and energy experts attribute the rising subsidy costs to high production expenses, rapid expansion of infrastructure, and excessive capacity charges for power plants. Over one-third of the government’s total subsidy allocation for the fiscal year has been earmarked for the power sector, amounting to approximately BDT 40,000 crore.
Professor A. K. Enamul Haque, Vice-Chancellor of UCSI University’s Bangladesh Campus and an economist, points to corruption as a key factor driving the increased subsidy burden. He notes that many agreements signed during previous Awami League administrations lacked transparency. Additionally, the use of indemnity laws enabled quick rental power plants to secure contracts, significantly inflating production costs.
Long-Term Economic Impact
Enamul, also a member of the White Paper Committee on the country’s economic status, emphasized that the power sector has been a major source of illicit financial flows. He argued that poor policy decisions by previous governments have inflicted long-term damage on the economy.
"We need a strategic review to address this issue. While some contracts cannot be terminated due to legal constraints, we can develop long-term plans to reduce excessive costs," he recommended.
Rising Subsidy Allocations Amid Price Hikes
Dr. Khondaker Golam Moazzem, research director at the Center for Policy Dialogue (CPD), previously stated that capacity charges and high global fuel prices have necessitated increased allocations for power subsidies in the fiscal year 2025.
Despite multiple electricity price hikes—8.5% in February 2023, followed by three 5% increments that year—the government continues to provide subsidies to cover capacity payments for under-construction power plants.
Summer Demand and Supply Projections
BIPPA forecasts that electricity demand could reach 18,232 MW during the summer months (March to September). To meet this demand, heavy fuel oil (HFO)-based power plants may need to generate up to 4,149 MW.
Although gas-based plants have a generation capacity of 10,667 MW, only 6,400 MW is expected to be feasible. Meanwhile, coal-based plants could contribute up to 5,558 MW.
Former BIPPA President Imran Karim remarked, "Even if peak demand is 16,000 MW, HFO-based plants will still be required, and this need will persist in the future."
Currently, HFO-based plants have a maximum capacity of 5,525 MW, which is expected to decline to 4,025 MW by 2030.
Financial Struggles in the Power Sector
The Power Development Board (PDB) is struggling to clear outstanding payments to power plants, with dues totaling BDT 21,000 crore. Of this amount, approximately BDT 9,000 crore is owed to plants under BIPPA.
Key Meeting Participants
The meeting was attended by Muhammad Fauzul Kabir Khan, Advisor to the Power, Energy, and Mineral Resources Ministry; Farzana Momtaz, Power Division Secretary; Md. Rezauel Karim, PDB Chairman; David Hasanat, current BIPPA President; and other members.
