Transparency alone won’t modernise Bangladesh’s power sector
A continuous and uninterrupted energy supply is undoubtedly crucial for sustaining Bangladesh's growth momentum and addressing its development challenges. Upgrading transmission lines, settling outstanding debts, and completing ongoing projects are the primary goals of this year's power and energy sector budget. The government has allocated Tk 7,90,000 crore in this year's budget. This is slightly lower than the previous year's, reflecting the government's increased focus on fiscal prudence and the economy. Although the budget speech appears encouraging, several issues remain unresolved. In the national budget for FY2025-26, Tk 2,178 crore has been allocated to the energy sector and Tk 20,342 crore to the power sector. The total allocation amounts to Tk 22,520 crore, a decrease of approximately 0.80 percent from the proposed budget for the current fiscal year.
One of the key measures in this year's budget is the repeal of the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act, 2010. This step aims to enhance transparency and accountability in the power sector. A national committee has been formed to evaluate agreements executed under this legislation. In addition, a separate committee has been established to review and revise the tariff structures of power purchase agreements (PPAs). Many PPAs have proved financially burdensome due to costly capacity payments to idle power facilities. These measures may foster greater transparency, but their success will depend on political will, independent review panels, and public access to the outcomes.
For all latest news, follow The Daily Star's Google News channel. To make the power distribution system more reliable and effective, underground distribution lines and substations are currently being installed in metropolitan areas as part of the sector's expansion and modernisation. The interim government has focused most of its budget on upgrading grid networks and distribution lines across six divisions rather than building new power plants. Moreover, it hopes to supply electricity from the 2,400 MW Rooppur Nuclear Power Plant to the national grid by December this year, as construction is expected to conclude soon. Allocations have also been made to ongoing projects, including the 1,200 MW coal-based Matarbari Power Plant, the 800 MW gas-fired Rupsha Plant, and the 150 MW HSD-based Syedpur Power Plant.
These steps are positive but still fall short of addressing Bangladesh's major energy challenges. At present, renewable energy accounts for only about 4.5 percent of total capacity. The government plans to add 3,400 MW of clean energy by 2028, but this progress remains slow.
In the FY26 budget, Tk 37,000 crore has been set aside for power sector subsidies, compared with Tk 40,000 crore initially allocated the previous year. The amount was later revised to Tk 62,000 crore after the interim government cleared the majority of unpaid bills.
On a positive note, in October 2024, Bangladesh signed a deal with Nepal to import 40 MW of hydropower at a low cost. Although modest in scale, this agreement signals growing regional electricity trade. Such trade is vital to strengthening energy security and diversifying sources, particularly during the hot summer months.
However, the government continues to spend heavily on fossil fuels. BAPEX has planned to carry out a 270 km geological survey, a 700 km 2-D seismic survey, and a 700 sq km 3-D seismic survey from FY2025-26 to FY2027-28. It also intends to drill 69 wells and complete the workover of 31 wells using its own rigs. Simultaneously, initiatives are underway to build cost-effective and sustainable infrastructure to help regulate energy prices in the medium term. The government has approved buying two LNG cargoes from the spot market for a total of Tk 1,000.85 crore.
Additionally, the government has proposed expanding the gas pipeline network by 40 km to improve pressure and delivery at the consumer level. To enhance gas monitoring and reduce system loss, SCADA (Supervisory Control and Data Acquisition) and GIS (Geographic Information System) technologies will be introduced into the existing gas network—an encouraging step towards digital management of energy infrastructure.
In the oil sector, a new project will establish Eastern Refinery Limited Unit-2, with the capacity to refine three million metric tonnes of crude oil annually. At the same time, the government has paid $570 million in import dues to stabilise fuel supplies. To improve control, Vehicle Tracking System (VTS) devices using SFDMS technology have been installed on more than 2,465 fuel tankers, allowing real-time tracking and helping prevent fuel theft or adulteration.
The FY2025-26 budget includes several significant projects to strengthen and make Bangladesh's energy sector more efficient. These include expanding transmission lines and increasing the capacity of grid substations to ensure more reliable power. Reducing system losses and unpaid bills in the distribution system is also a top priority. The government will review current power generation projects and seek to increase electricity trade with neighbouring countries to improve output and reduce costs. In terms of resources, the plan includes extracting 6.5 lakh metric tonnes of coal and 1.3 lakh metric tonnes of stone domestically. To improve and modernise the gas system, the government will also install SCADA systems and use GIS mapping tools.
In summary, the FY2025-26 power and energy budget focuses on gradual but steady changes. While there are signs of improved planning and greater transparency, long-term success remains uncertain due to the slow growth of renewable energy and continued reliance on fossil fuels. Bangladesh needs deeper policy and structural reforms to truly modernise its energy sector rather than relying on incremental fixes.
Afia Mubasshira Tiasha is senior research associate at South Asian Network on Economic Modeling (SANEM). She can be reached at [email protected].
Views expressed in this article are the author's own.
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