Bangladesh’s power sector is losing an estimated $1.5 billion annually due to excess capacity, costly contracts, heavy import dependence and currency depreciation, according to the National Review Committee (NRC).
The committee said unfavourable power purchase agreements (PPAs) significantly contributed to the losses. However, energy experts argue the crisis is structural and has deepened over the past decade.
Surplus Capacity Raises Costs
After overcoming power shortages around 2015, Bangladesh rapidly expanded its generation capacity. But slower-than-expected demand growth left thousands of megawatts idle. Despite low utilisation, the government continues to pay capacity charges to many independent power producers (IPPs), increasing subsidy burdens.
The NRC estimates that between 7,700MW and 9,500MW of installed capacity is either unnecessary or unusable due to fuel and infrastructure constraints.
Import Dependence and Dollar Pressure
According to the Institute for Energy Economics and Financial Analysis (IEEFA), import dependence in Bangladesh’s power sector rose to about 65% between FY2018-19 and FY2024-25, largely driven by LNG, coal and oil imports.
With most fuel imports and capacity payments settled in US dollars, the depreciation of the taka has sharply inflated costs. The exchange rate weakened from Tk84 per dollar in 2019 to around Tk123 in 2025 — increasing local currency expenses by over 46%.
Generation Costs Outpace Tariffs
Data from the Bangladesh Power Development Board (BPDB) shows the average generation cost rose from Tk5.95 per unit in FY2018-19 to around Tk12 in 2025 — an increase of nearly 118%.
In contrast, the average retail tariff stands at about Tk8.95 per unit, leaving a gap of more than Tk3 per unit. The shortfall has led to rising subsidies, mounting losses and delayed payments.
Governance Concerns
Power, Energy and Mineral Resources Adviser Fouzul Kabir Khan acknowledged that the losses stem not only from contracts but also from waste, fraud and weak governance. Analysts say poor demand forecasting and politically influenced project approvals further worsened the crisis.
Although transmission and distribution losses have declined to around 7–10%, experts note that even single-digit losses translate into significant financial waste when energy is imported at high dollar prices.
Reform Imperative
Energy analysts recommend scaling up renewable energy, reducing reliance on oil-based plants, limiting capacity payments and improving transparency in contracts.
The NRC warns that full cost-recovery tariffs could raise industrial electricity prices 80–90% higher than competitors such as China, India and Vietnam, posing risks to industrial competitiveness.
Without structural reforms, the fiscal burden on the government is expected to continue.
