The BNP-led government has pledged to clean up the energy sector, announcing plans to review capacity charges and power purchase agreements (PPAs), shut down inefficient plants and pursue gas exploration, while cutting sector spending by nearly a quarter.
Finance Minister Amir Khosru Mahmud Chowdhury, while placing the FY2026-27 budget before parliament, blamed the previous government for ballooning production costs, rampant corruption and what he described as outright looting through capacity charges.
Annual subsidies in the sector now exceed Tk40,000 crore, he said, further burdened by one-sided contracts signed under the Awami League government.
The government will pursue short, medium and long-term reforms, the minister said.
The plans include intensive monitoring of the power sector, punitive action against those involved in corruption, shutting down inefficient power plants, modernising facilities where necessary, and implementing a Least Cost Generation Plan.
Energy security push
The minister said the government has taken steps to ensure energy security, including strengthening domestic gas exploration, increasing refining capacity and diversifying import sources.
The previous government, he said, focused solely on LNG and fuel oil imports and made no meaningful effort to explore gas resources either onshore or offshore.
The government plans to drill a total of 26 exploration, development and workover wells, and import 7.18 million tonnes of LNG to meet growing demand.
BAPEX will conduct 270 kilometres of geological surveys, 700 line kilometres of 2D seismic surveys and 700 square kilometres of 3D seismic surveys over the next three years.
In the medium term, it will drill 69 wells using its own rigs and carry out workover operations on 31 others. A new exploration rig will also be procured.
A fresh offshore bidding round will be announced and the model Production Sharing Contract revised to attract investors while protecting national interests.
Work is under way on land acquisition and the appointment of consultants for a land-based LNG terminal at Matarbari, Moheshkhali.
A new floating terminal is also under review.
In the longer term, the government intends to build a crude oil refinery with a capacity of five million metric tonnes, in phases, either in Chittagong or a coastal industrial zone.
“We are giving priority to increasing domestic capacity and expanding gas exploration and extraction both onshore and offshore,” Chowdhury said.
Spending falls, subsidy cut
The budget allocates Tk17,345 crore to the Ministry of Power, Energy and Mineral Resources in FY27, down from Tk22,520 crore proposed in the previous fiscal year, a decline of 23 per cent.
The Power Division received Tk14,996 crore, almost entirely for development spending, while the Energy and Mineral Resources Division was allocated Tk2,349 crore.
Power subsidies have also been cut sharply, to Tk37,000 crore from Tk40,000 crore in the last fiscal year and Tk62,000 crore in the revised budget for the previous fiscal year.
Energy expert Shafiqul Alam said the reduction in development spending was not alarming, as Bangladesh no longer needs to build power plants at the pace it once did.
The allocations point to a shift away from capacity expansion towards efficiency, renewable energy and domestic resource development, he said, although whether the funding is sufficient to ensure long-term energy security remains an open question.
Grid targets, Rooppur timeline
Installed generation capacity stands at 28,919 megawatts, including imported electricity and on-grid renewable energy, but the minister acknowledged that a reliable power supply has yet to be achieved.
The government aims to raise generation capacity to 35,000 megawatts by 2030 and extend transmission lines to 25,000 circuit kilometres. It also wants renewable energy to account for 20 per cent of electricity generation by 2030.
The first 1,200-megawatt unit of the 2,400-megawatt Rooppur Nuclear Power Plant is expected to be connected to the national grid by January 2027.
Solar duty waiver with a deadline
The budget proposes a full waiver of import duty, regulatory duty, supplementary duty and advance tax on key solar equipment and components until 30 June 2031.
The relief applies to the distribution scale, while utility-scale projects already enjoy broad exemptions at various stages.
Preferential treatment for mounting structures, lithium cells, battery packs and battery energy storage systems will end after 30 June 2028 to encourage domestic manufacturing.
Alam said the waiver could reduce import-stage costs for distributed systems such as rooftop solar installations by 25 to 30 per cent.
On the manufacturing push, however, he was less optimistic. Bangladesh lacks the critical minerals required to manufacture solar equipment and batteries, while global supply chains remain heavily concentrated in China.
“Most of the raw materials would still need to be imported. To compete internationally, manufacturers would have to operate on a very large scale and eventually export, which would be challenging given Bangladesh’s energy constraints and limited market size,” he said.
The government also plans to extend transmission lines, reduce system losses and conduct feasibility studies on waste-to-energy, wind and tidal energy projects under the Merchant Power Policy 2025.
