THE Finance Division is reported to be setting aside Tk 370 billion in the forthcoming budget in power-sector subsidy. Yet, the Power Development Board could face a gap of about Tk 150 billion. But what it indicates is a possible power price increase as much to the detriment of consumers as to the benefit of private power producers, who have for years been a drain on the state exchequer that has, in turn, fallen squarely on the consumers. A recent assessment by the Energy Regulatory Commission shows that the amount of capacity charge — the amount of money that the Power Development Board pays power-sector investors even when the plants do not produce electricity, with an aim to cover the loans that the plants receive, along with interest, salaries of the employees and returns on equity — would reach Tk 526.08 billion in the 2027 financial year from Tk 482.6 billion in the 2026 financial year because of the maturity of deals signed with private power producers during the Awami League rule. The capacity charge is projected to grow to Tk 5.46 a kilowatt-hour, or a unit, in the next financial year, more than double the Tk 2.38 a kilowatt-hour that it is in the outgoing financial year.
All this means that the capacity charge would gobble up the subsidy in the sector. A large power overcapacity, evident in the generation capacity of about 29 gigawatts against the demand for 15GW, suggests little fiscal space. The power board counted Tk 454.51 billion in capacity payment in the 2025 financial year, Tk 367.64 billion in the 2024 financial year, Tk 244.79 billion in the 2023 financial year and Tk 158.93 billion in the 2022 financial year. Energy Regulatory Commission officials say that there are two ways the power board could meet the gap, by either increasing power prices, which is the easy option, or by cutting down generation cost, which is difficult. A regulatory commission official says that the scope for reducing power production cost is narrow. The other option that remains is that the government should review the deals signed with private power producers to rid the power sector of the inordinate capacity charge although the commission official says that the deals can hardly be reviewed because of legal constraints. The interim administration in November 2024 repealed the Awami League-era Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act 2010, raising hopes for a review of the deals. The government that time failed to do so.
The government now should rise to the occasion and review the deals signed with private power producers and take action accordingly to cut down on unnecessary overcapacity and bring down the capacity charge to save the power sector and consumers.
