The government is set to review the agreements signed with Independent Power Producers (IPPs) during the Awami League's tenure, citing numerous inconsistencies and legal ambiguities. Finance Adviser Dr. Salehuddin Ahmed made the disclosure on Tuesday after presiding over meetings of the Advisory Council Committee on Government Procurement and the Advisory Council Committee on Economic Affairs at the Secretariat.
"There are many foreign companies operating in the independent power sector. We have observed discrepancies in several agreements," said Dr. Salehuddin. "We will move forward with the review process in accordance with a directive from the High Court. However, such an initiative requires legal backing, and we have approved a proposal in today's meeting to obtain legal support accordingly."
Legal Review Underway: The Finance Adviser emphasized that the government cannot unilaterally alter or cancel any contract with foreign investors. Instead, a careful and legally guided review will be conducted. "These are legally binding international contracts. Any decision will be taken after proper legal consultation. The process must comply with international norms," he told reporters. 
The move comes amid growing criticism of the financial burden placed on the government through long-term power purchase agreements (PPAs) signed with IPPs over the past decade. Many of these agreements include costly capacity charges, obligating the government to pay even when electricity is not generated or utilized.  
High Court Directive Behind Review: The review process is partly prompted by a High Court directive which recommended examining the terms and legality of several Independent Power Plant agreements-especially those that allegedly contain terms unfavorable to the state or facilitate profit repatriation without due taxation. Although the specifics of the court order were not disclosed, government officials confirmed that the directive provides the legal groundwork to revisit agreements signed under previous administrations.
The IPP Landscape in Bangladesh: Bangladesh's energy sector underwent a significant transformation over the last 15 years, with the government opting to engage private and foreign companies in building and operating power plants.
Currently: Over 60% of electricity generated in Bangladesh comes from Independent Power Producers. Many contracts are 20-25 years long, with guaranteed minimum purchase clauses. Capacity charges to IPPs cost the government thousands of crores annually, regardless of demand. Idle power plants have become an issue due to reduced electricity demand in some regions. Experts and critics argue that the government's dependency on IPPs has become economically unsustainable.
Political and Economic Implications: The Finance Adviser's announcement is likely to have political and economic ripple effects, particularly as it involves foreign investors and multinational companies. Analysts note that while the review may be a step toward increasing fiscal discipline, it could also: Raise concerns among foreign investors about contract sanctity. Strain diplomatic relations if not handled transparently. Trigger legal disputes or arbitration cases under Bilateral Investment Treaties (BITs). However, the Finance Adviser assured that the government is aware of these risks and will proceed cautiously. "We are not tearing up agreements. We are reviewing them within the legal framework and in consultation with all stakeholders," he reiterated.
Scope of the Review: Although the government has not yet named specific companies or contracts under scrutiny, sources in the Energy Division suggest that the review will initially cover: Contracts signed between 2010 and 2023. Agreements involving large-scale capacity payments. Emergency power rental deals extended beyond their original timeline. IPPs that have failed to meet performance benchmarks.
Expert Opinions: Energy analyst Dr. M Tamim, former special assistant to the Chief Adviser in the caretaker government, said reviewing these agreements is "long overdue." "The state has incurred unnecessary losses due to inflexible and ill-negotiated contracts. A legal review, if done carefully, can rebalance the power sector without harming investor confidence," he told the correspondent. He also emphasized the importance of setting precedents for future agreements, particularly in renewable energy, to avoid similar fiscal pitfalls.
Fiscal Pressures Driving the Move: The Finance Ministry is under increasing pressure to reduce subsidies and budget deficits amid slowing revenue growth and increased borrowing. According to Finance Division data: Bangladesh paid over Tk 20,000 crore in capacity charges to IPPs in FY 2023-24. An estimated 30-35% of power capacity remains unused, mainly due to a mismatch between peak demand and generation capacity. Fuel cost volatility has further increased the strain on the energy subsidy budget. The government's aim is to rationalize energy spending without compromising on generation capacity.
What Comes Next: Following the meeting, officials outlined the next steps: Formation of a legal review committee under the Ministry of Law and Justice. Consultation with foreign legal experts on international investment treaty obligations. Audit of all existing IPP contracts, prioritizing those with adverse terms. Coordination with the Bangladesh Energy Regulatory Commission (BERC) and Power Division. The process is expected to begin by August 2025, with findings possibly made public by year-end.