Power prices to rise further as fuel cost, subsidy climb

The price of electricity is expected to rise further as global fuel costs, transport charges and insurance expenses continue to increase, Finance Minister Amir Khosru Mahmud Chowdhury indicated while presenting the national budget in Parliament on Thursday.

“In disrupted global shipping routes have created new challenges for the smooth flow of international trade. Elevated global interest rates continue to constrain international financial flows. This has contributed to higher costs of external borrowing, trade financing and essential imports,” the finance minister said in his budget speech.

In a recent adjustment, the government raised the bulk electricity tariff to Tk 8.39 per kilowatt-hour (kWh), an increase of more than 19 per cent from the previous rate.

According to analysis by the Bangladesh chapter of the Institute for Energy Economics and Financial Analysis (IEEFA), the subsidy burden per unit of electricity has increased by more than 42 per cent between FY2022 and FY2025, highlighting structural weaknesses in the country’s energy governance.

IEEFA Bangladesh lead analyst Shafiqul Alam said the power sector is under mounting financial pressure as subsidy requirements continue to rise despite repeated tariff hikes. He said the revenue gap is widening due to capacity payments to private plants, reliance on costly furnace oil-based generation, fuel supply constraints and underutilisation of grid electricity by industries.

The report noted that repeated price increases alone are insufficient without broader reforms aimed at reducing generation costs and improving grid efficiency.

Energy expert Dr Ijaz Hossain said while the budget offers a five-year tax holiday for solar equipment and extended tax benefits for battery imports until June 2028, the policy framework appears inconsistent.

He urged greater focus on grid expansion, land availability and large-scale solar projects such as 100MW installations to reduce dependence on imported fuels. He, however, welcomed the government’s plan to expand onshore drilling activities.

Former energy adviser to the caretaker government Dr M Tamim cautioned against what he described as the “mushroom growth” of renewable energy projects, warning that weak oversight could allow substandard equipment into the market and undermine sector development.