Energy Subsidies in Bangladesh: A profile of groups vulnerable to reform

This 2013 report analyzes the escalation of energy subsidies in Bangladesh, which rose from BDT 107.7 billion in FY2010 to an estimated BDT 298.1 billion in FY2013. The study identifies that the energy sector now accounts for over half of all budgetary subsidies. It highlights that while the poor are heavily dependent on kerosene and diesel for irrigation, the rich benefit more from gasoline and natural gas subsidies. The report argues that universal subsidies are inefficient and recommends a transition toward targeted social safety nets and volume-differentiated electricity tariffs to reduce the fiscal burden and address the national power crisis.

• Total on-budget subsidies in Bangladesh increased significantly from BDT 107.7 billion in FY2010 to an estimated BDT 298.1 billion in FY2013, representing a 177 per cent increase over three years. During this period, the share of total subsidies as a percentage of GDP rose from 1.8 per cent to 3.3 per cent.
• The composition of government subsidies shifted toward the energy sector. In FY2010, agriculture accounted for 54 per cent of total subsidies, while fossil fuels and electricity accounted for 14 per cent and 9 per cent respectively. By FY2013, the energy sector (fossil fuels and electricity) accounted for 52 per cent of total budgetary subsidies.
• Overall energy subsidies, including both on-budget and off-budget costs, grew sharply from BDT 9.8 billion in FY2010 to BDT 125.9 billion in FY2011 and BDT 148.8 billion in FY2012. This escalation was driven by rising import prices and increased energy consumption.
• Petroleum product subsidies are primarily driven by the difference between import prices and government-administered retail prices. Subsidies for refined imported petroleum products jumped from BDT 1.84 billion in FY2010 to BDT 73.28 billion in FY2011, largely due to higher world market prices and increased use of diesel and furnace oil for electricity generation in rental power plants.
• The transport sector is the largest consumer of petroleum products, accounting for approximately 54 per cent of total sales in FY2010 and FY2011. The power sector's share of petroleum consumption grew rapidly from around 6-8 per cent up to FY2011 to 19 per cent in FY2012.
• Natural gas is implicitly subsidized in Bangladesh, benefiting the electricity sector, household consumers, and the fertilizer industry. While total subsidy calculations are difficult due to data gaps, gas extracted by International Oil Companies (IOCs) is purchased by the state at BDT 243.89 per cubic foot and sold at BDT 144.65, creating a direct subsidy of BDT 90.34 per cubic foot.
• Energy expenditure as a share of household income is highest for the poor across all occupational groups: 3.33 per cent for agricultural households, 3.91 per cent for non-agricultural households, and 5.44 per cent for other households.
• Energy consumption patterns vary by income and occupation. Poor and lower-middle agricultural households rely heavily on kerosene (58 per cent and 42 per cent of energy expenditure respectively) for irrigation and electricity. In contrast, rich and upper-middle non-agricultural households spend more on electricity (47-53 per cent) and natural gas (26-30 per cent).
• Certain production sectors exhibit high energy intensity. The most petroleum-intensive activities include electricity and water generation (BDT 128.24 per BDT 1,000 output), railway transport (BDT 123.75), and basic chemicals (BDT 95.75). The most electricity-intensive activities include education services (BDT 12.78 per BDT 1,000 output) and public administration and defense (BDT 12.71).
• The report concludes that universal diesel subsidies are inefficient pro-poor expenditures and recommends reforming them to be more targeted. It also suggests that electricity subsidies resulting from billing failures or generalized underpricing are regressive and should be replaced by volume-differentiated tariffs or social safety nets.

APA

Mujeri, M. K., Chowdhury, T. T., & Shahana, S. (2013). Energy Subsidies in Bangladesh: A profile of groups vulnerable to reform. International Institute for Sustainable Development. https://www.iisd.org/gsi/sites/default/files/ffs_stakeholders_bangladesh.pdf

Chicago

Mujeri, Mustafa K., Tahreen Tahrima Chowdhury, and Siban Shahana. Energy Subsidies in Bangladesh: A profile of groups vulnerable to reform. International Institute for Sustainable Development, 2013. https://www.iisd.org/gsi/sites/default/files/ffs_stakeholders_bangladesh.pdf.

Wikipedia

{{cite report |last1=Mujeri |first1=Mustafa K. |last2=Chowdhury |first2=Tahreen Tahrima |last3=Shahana |first3=Siban |title=Energy Subsidies in Bangladesh: A profile of groups vulnerable to reform |publisher=International Institute for Sustainable Development |date=August 2013 |url=https://www.iisd.org/gsi/sites/default/files/ffs_stakeholders_bangladesh.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mujeri2013energy, author = {Mujeri, Mustafa K. and Chowdhury, Tahreen Tahrima and Shahana, Siban}, title = {{Energy Subsidies in Bangladesh: A profile of groups vulnerable to reform}}, institution = {International Institute for Sustainable Development}, year = {2013}, month = aug, url = {https://www.iisd.org/gsi/sites/default/files/ffs_stakeholders_bangladesh.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }