Energy Sector in Bangladesh: An agenda for reforms

This report by the Bangladesh Institute of Development Studies, published by the International Institute for Sustainable Development, analyzes the energy sector in Bangladesh, focusing on the fiscal impact of energy subsidies and the government's reform agenda to meet rising electricity demand by 2021.

• Energy subsidies in Bangladesh increased dramatically between FY2010 and FY2012, rising from Tk. 985 crore (~US$128 million) to Tk. 14,885 crore (~US$1.91 billion). This escalation was driven by a rapid increase in energy consumption and rising import prices for energy products.
• The electricity generation mix has shifted toward more expensive liquid fuels due to natural gas shortages. Liquid fuel-based generation rose from 6 per cent in 2008–09 to 18 per cent in 2011–12, contributing to a rise in the per-unit average cost of electricity from 2.33 Tk. per kWh in FY2008 to 5.36 Tk. per kWh in FY2012.
• The government's Power System Master Plan (PSMP) 2010 aims to address a massive increase in grid system demand, forecasting a need for 33,708 MW by 2030 compared to approximately 7,518 MW in 2012. The plan utilizes a phased approach, starting with immediate liquid fuel-based rental plants and moving toward long-term solutions including nuclear power and renewable energy.
• Electricity pricing in Bangladesh is characterized by a two-step process involving bulk tariff rates set by the Bangladesh Power Development Board (BPDB) and retail rates set by distribution companies. The system relies on cross-subsidization, where industrial and commercial sectors pay higher tariffs to support lower rates for domestic and agricultural users.
• The Bangladesh Petroleum Corporation (BPC) faces significant losses because the Bangladesh Energy Regulatory Commission (BERC) often sets retail prices for petroleum products lower than the supply cost. Unlike electricity pricing, BERC determines petroleum prices through internal consultation with BPC without public hearings.
• To address macroeconomic instability and fiscal pressure from energy subsidies, the government entered a three-year Extended Credit Facility (ECF) with the IMF in 2012. This program requires reducing subsidy costs through price adjustments and phasing out off-budget financing for state-owned enterprises.
• The report recommends several priority actions for reform, including the implementation of demand-side management (DSM) to reduce demand, the conversion of rental power plants to gas-based plants, and the creation of an automatic adjustment mechanism for retail petroleum prices to reflect international market changes.

APA

Mujeri, M. K., Chowdhury, T. T., & Shahana, S. (2014). Energy Sector in Bangladesh: An agenda for reforms. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/energy_sector_bangladesh.pdf

Chicago

Mujeri, Mustafa K., Tahreen Tahrima Chowdhury, and Siban Shahana. Energy Sector in Bangladesh: An agenda for reforms. International Institute for Sustainable Development, 2014. https://www.iisd.org/system/files/publications/energy_sector_bangladesh.pdf.

Wikipedia

{{cite report |last1=Mujeri |first1=Mustafa K. |last2=Chowdhury |first2=Tahreen Tahrima |last3=Shahana |first3=Siban |title=Energy Sector in Bangladesh: An agenda for reforms |publisher=International Institute for Sustainable Development |date=March 2014 |url=https://www.iisd.org/system/files/publications/energy_sector_bangladesh.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mujeri2014energy, author = {Mujeri, Mustafa K. and Chowdhury, Tahreen Tahrima and Shahana, Siban}, title = {{Energy Sector in Bangladesh: An agenda for reforms}}, institution = {International Institute for Sustainable Development}, year = {2014}, month = mar, url = {https://www.iisd.org/system/files/publications/energy_sector_bangladesh.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }