Yunus government’s reforms in the power sector are just empty talk: Losses of 17,000 crores, subsidies of 60,000 crores

❐ BD Digest Desk

Dr. Yunus’ interim government, which took office with loud announcements of cost savings and structural reforms in the power sector, has in reality proven to be a complete failure within a year.

The net loss of the Bangladesh Power Development Board (BPDB) has increased to Tk 17,210 crore in the just-ended fiscal year 2024-25, which is more than 94 percent compared to the previous fiscal year. Huge subsidies, announcements of repeal of laws, assurances of tariff renegotiation—all of the rhetoric of reform that was made, has not been reflected in the financial picture of the power sector.

BPDB’s net loss in the 2023-24 fiscal year was Tk 8,764 crore. This loss has almost doubled in a year, indicating that the Yunus government’s policy decisions in the power sector were just a strategy to avoid the main problem. Although subsidies of about Tk 60,000 crore were given in the last fiscal year, including the previous arrears of Tk 27,439 crore, on the pretext of reducing the liabilities left by the Awami League government, the financial pressure did not reduce. Rather, the average production cost of electricity has increased, and instead of reducing system losses, it has increased.

In the fiscal year 2024-25, the total expenditure of BPDB stood at Tk 1,21,420 crore. In contrast, the income from selling electricity was only Tk 69,383 crore. To address the deficit, a subsidy of Tk 38,636 crore was provided by the Finance Department.

Despite all this, BPDB still had a loss of Tk 17,210 crore at the end of the year. In other words, the sector, which cannot be sustained even with subsidies, is now the real picture of the government’s reform success.

According to experts, the reforms that the Yunus government is talking about in the power sector are not effective financial reforms. The government has not shown the political courage to take difficult decisions such as re-evaluating unnecessary and high-cost power plants, reducing the burden of capacity charges, renegotiating long-term contracts, or planning for demand-based generation. As a result, instead of reducing losses, it has created greater financial risks for the future.

According to Professor M. Tamim, Vice Chancellor of Independent University Bangladesh, no real basis has been created to reduce the cost of the power sector. The entire sector is trapped in a loss trap as planning and implementation are carried out from within the single monopoly structure of BPDB. The Power Department has not conducted any effective review on whether the production, purchase and sale process is rational or not.

One of the biggest reasons for the losses has been the increasing dependence on private power plants. In the 2024-25 fiscal year, the cost of purchasing electricity from IPPs was Tk 72,710 crore, which is Tk 14,694 crore more than the previous fiscal year. However, the estimate of this cost in the national budget was only Tk 43,987 crore. This means that there has been a huge discrepancy between the budget plan and the actual cost, for which the Yunus government cannot avoid responsibility.

The average price of electricity purchased from the private sector in that fiscal year stood at Tk 14.45 per unit. As a result, the average cost of electricity generation increased to Tk 12.10, compared to Tk 11.35 the previous year. The decision to purchase electricity from expensive oil-based and private plants while keeping gas-based government plants in place has deepened BPDB’s financial crisis.

Another major failure of the reforms is system losses. While the average system loss was 10.6 percent in the 2023-24 fiscal year, it increased to 10.13 percent in the 2024-25 fiscal year. While the global norm is 8 percent, the Yunus government could not even meet the minimum target of reducing wastage in the electricity sector.

There is also a huge discrepancy in the calculation of subsidies in the power sector. According to the BPDB, subsidies of Tk 38,636 crore have been given in the fiscal year 2024-25. On the other hand, the Power Department’s documents show this figure as Tk 59,600 crore. If there is such a big difference in the accounts of two departments of the same government, then it is natural to raise questions about the transparency of the financial management of the power sector.

Even though the prices of fuel oil and gas in the global market have fallen to their lowest levels in the past few years, BPDB’s production costs have not decreased. The company’s officials could not give a specific explanation as to why electricity costs are increasing even though the price of oil has dropped to $60 per barrel and gas prices are between $10-12.

According to experts, this increasing loss in the power sector will ultimately put greater subsidy pressure on the government. There is no alternative but to take bold decisions in production structure, contract management and policy reforms for a sustainable solution. But a year of experience has shown that the Yunus government has chosen to hide the problem in the name of power sector reforms—not to solve it.