The overall allocation for the power and energy sector has been reduced by more than a fourth compared with the fund allocated in the outgoing financial year鈥檚 budget, with the interim government announcing on Monday its plan of reducing power production costs by 10 per cent.
An allocation of Tk聽22,520 crore has been made in the proposed budget for the 2025-26 financial year, which was Tk聽30,317 crore for FY25. The amount in the revised budget for FY25 stood at Tk聽22,704 crore.
In his televised speech, finance adviser Salehuddin Ahmed also announced the plan to step up local gas production by proposing a substantial increase in investment in the annual development programme in the energy sector.
The plan to increase local exploration drew positive reviews which were overshadowed by potential consequences of the government planning to reduce the power generation cost.
鈥榃ith inefficiency plaguing the sector, the plan to reduce power generation cost sounds unreal,鈥� said M Shamsul Alam, energy adviser at the Consumers Association of Bangladesh.
The power sector expense is set to increase with power overcapacity further rising in the 2025-26 financial year, implying increased expenses in areas such as capacity payment.
The addition of 1,320MW Patuakhali coal-based power plant, which is likely to come online soon, is likely to increase the capacity payment by Tk聽3,300 crore.
Another additional expense would be paying capacity charge of about Tk 1,800 crore to the 1,200MW Matarbari power plant. There are other similar power plants which are likely to increase power sector expenses.
鈥楻educed power production in the outgoing financial year implied power generation cost rise for it meant more power plants sitting idle,鈥� said Hasan Mehedi, member secretary of the Bangladesh Working Group on Ecology and Development, a forum of green activists.
Bangladesh鈥檚 current installed power generation capacity is 27,424MW. The maximum peak generation in the outgoing financial year is about 16,000MW. The average peak generation is 13,000MW.
After assuming office following the overthrow of the authoritarian Awami League government by a mass uprising in August 2024, the interim government planned to reduce the power sector expenses by 10 per cent by mainly reducing the generation costs.
The plan apparently failed as the government had to eventually generate power from liquid fuel more than planned due to shortage of coal and gas due to a dollar crisis.
Past year, the power and energy sector needed Tk聽40,000 crore in subsidy, which is set to substantially increase this year.
The plan to reduce the power sector budget is like following in the footsteps of the ousted AL regime, which reduced power sector budget in the past financial year in line with its plan to reduce subsidy, experts said.
Reducing government subsidy is a condition under which the ousted AL government availed $4.7 billion loan from the International Monitory Fund to come out of the dollar crisis.
鈥楾he budget promises to carry on harmful projects taken by the past AL government,鈥� said Shamsul Alam.
The budget talked about reviewing old deals but made no promises about capacity payment.
In the annual development programme, the allocation in the power sector was reduced from Tk聽29,177 crore to Tk聽20,284 crore. In the energy sector, the development budget was increased to Tk聽2,086 crore from Tk聽969 crore.
In the budget speech, the finance adviser mentioned the plan of supplying 648 mmcfd of gas from domestic sources within this year and extracting an additional 1,500 mmcfd by 2028.
Expressing his intension to increase the capacity of local gas exploration company BAPEX, the finance adviser said that BAPEX had planned to carry out a 270-kilometre geological survey, a 700-km 2-D seismic survey, and a 700-square km 3-D seismic survey between FY聽2025- 26 and FY聽2027-28.
In the medium term, BAPEX has planned to drill 69 wells and complete the workover of 31 wells using its own rigs.
鈥榃hat comes out of the budget remains to be seen for it depends a lot on efficient implementation of the plan,鈥� said Shafiqul Alam, energy analyst at the Institute for Energy Economics and Financial Analysis.
He, however, was surprised by the absence of any plan to promote renewable energy though the government boasted of its policy to promote zero emission.
The revenue income of the government is also likely to substantially fall from the proposal of value-added tax exemption for LNG at the import stage.
The profits of gas distribution companies are also likely to increase as the proposed budget has cut the withholding tax rate to 0.6 per cent from 2 per cent.
