Bangladesh’s power sector is incurring annual losses of around $1.5 billion, according to estimates by the National Review Committee (NRC), which attributes much of the financial strain to unfavorable power purchase agreements. However, energy analysts argue that the crisis runs far deeper, rooted in structural inefficiencies, excess capacity, heavy import dependence, governance failures and the sharp depreciation of the taka.
From shortage to surplus
Until 2015, Bangladesh struggled with power shortages. The situation has since reversed, with installed capacity far exceeding demand growth. This surplus has led to high-capacity payments for idle plants, placing a growing burden on public finances.
Analysts, including those from the Institute for Energy Economics and Financial Analysis (IEEFA), note that Bangladesh’s import dependence in the power sector rose to about 65% between FY2018-19 and FY2024-25, largely driven by fossil fuel imports. This import-heavy model has left the sector vulnerable to global price volatility and currency fluctuations.
Currency depreciation intensifies costs
The depreciation of the taka has significantly amplified energy costs. The exchange rate weakened from Tk 84 per US dollar in 2019 to around Tk 123 in 2025, increasing the local currency cost of dollar-denominated fuel imports, capacity payments and foreign financing obligations by nearly 46%.
A $1 billion fuel import bill that once cost Tk8,400 crore now requires roughly Tk 12,300 crore, purely due to exchange rate movements.
Generation costs outpace tariffs
According to data from the Bangladesh Power Development Board (BPDB), the average cost of electricity generation rose from Tk5.95 per unit in FY2018-19 to around Tk12 per unit in 2025—an increase of over 118% in seven years.
Retail tariffs, however, stand at approximately Tk 8.95 per unit, creating a gap of more than Tk 3 per unit. This mismatch has resulted in rising subsidies, mounting losses and payment arrears.
Governance and system losses
Power, Energy and Mineral Resources Adviser Fouzul Kabir Khan acknowledged that losses stem not only from contract structures but also from waste, fraud and governance failures.
While system losses have declined significantly—from 24.5% in 2001 to about 7.25% by mid-2024—even single-digit losses translate into substantial financial waste when energy is imported at high dollar prices. In the gas sector, state-owned Petrobangla reported distribution losses costing tens of billions of taka.
Costly contracts and idle capacity
High reserve margins and reliance on oil-based generation have further inflated costs. IEEFA estimates that reducing oil-based power generation and expanding solar capacity could significantly ease the subsidy burden.
BPDB’s increasing reliance on Independent Power Producers (IPPs) has also driven up expenditures, with spending on IPP power purchases rising more than 25% year-on-year between FY2023-24 and FY2024-25.
Newer gas-fired plants, burdened with heavy fixed charges, remain underutilized, raising average system costs despite adequate generation capacity.
Structural reform urgently needed
Experts warn that without prudent demand forecasting, expansion of renewable energy, better contract structuring and stronger governance, the financial bleeding in the power sector will persist.
What began as an effort to eliminate power shortages has evolved into a complex fiscal challenge—where surplus capacity, import dependence and currency weakness are draining billions from the national exchequer each year.
