Bangladesh:s power sector is once again trapped in a troubling cycle of mounting arrears, raising concerns over electricity supply sustainability and the financial stability of private power producers.
Despite aggressive efforts by the interim government to repay foreign loans and clear longstanding unpaid bills since assuming office, independent power producers (IPPs) warn that payment delays have escalated sharply since March 2025 - pushing the sector toward a fresh liquidity crunch.
According to official data, the ousted Awami League government left behind $3.2 billion (around Tk 39,000 crore) in unpaid foreign loans related to the power and energy sector. The interim government has already paid Tk 29,000 crore of this by April 2025 and continued settling additional external debts. In parallel, the government continued issuing special bonds - an initiative originally launched by the previous administration - to clear domestic arrears owed to power plants.
Yet, despite paying Tk 25,696 crore in outstanding dues through these special bonds so far, the arrears problem remains deeply rooted. Local private power companies now report that they are owed at least Tk 20,000 crore from the Bangladesh Power Development Board (BPDB), with outstanding bills piling up month after month. Rising Unpaid Bills Threaten Operations: Private power producers disclosed that they have not been receiving regular payments since March 2025, causing severe financial stress. Furnace oil-based power plants alone are owed Tk 6,000-7,000 crore. Gas and coal-based power plants account for the remaining unpaid bills. Many producers are struggling to service their bank loans, purchase fuel, or carry out maintenance, insiders told The Daily Industry.
BPDB officials admit the shortfall but say the root of the issue lies elsewhere. Speaking anonymously, a senior BPDB official said: “Electricity bills are being paid. But not at the level needed to reduce arrears. The matter depends entirely on the finance ministry. If subsidy funds are not released as requested, it becomes impossible to clear the bills.” Efforts to get comments from BPDB Chairman Engineer Rezaul Karim were unsuccessful.
Subsidy Reduction Drives New Arrears Surge: The interim government increased the electricity subsidy to Tk 62,000 crore in FY 2024-25 - adding Tk 22,000 crore specifically to pay outstanding bills. But in the current FY 2025-26 budget, the subsidy was sharply cut to Tk 37,000 crore as part of broader fiscal tightening and subsidy phase-out plans.
Experts warn that reduced subsidies, without tariff adjustments, are creating a dangerous operating gap. Bangladesh Independent Power Producers Association (BIPPA) president David Hossainat told The Daily Industry: “Private power producers have five to six months of unpaid bills with BPDB. Without regular payments, we cannot repay bank loans. The real issue lies in tariff adjustment. If generation cost and sales tariff remain mismatched, it will be impossible to resolve this crisis.”
Major Plants Facing Fuel Cuts and Operational Disruptions: Private sector giant United Power is one of the worst-affected victims of delayed payments: Over Tk 3,000 crore in bills are unpaid. Nearly Tk 2,500 crore of that is related to furnace oil-based plants. Due to unpaid gas bills, the 195 MW United Power gas plant in Ashuganj has already had its gas supply disconnected by Bakhrabad Gas Distribution Company. Correspondence has been sent to BPDB acknowledging the disconnection and financial distress. BPDB sources say different private power suppliers face arrears ranging from 3 to 7 months, and six large companies alone are reportedly owed about Tk 12,500 crore.
Demand Rising as Payments Fall Behind: Electricity demand in Bangladesh currently hovers around 15,300 MW during peak evening hours. Coal-based plants supply roughly 3,844 MW, Oil-based plants supply about 3,041 MW. The rest is met through gas and other sources - largely from IPPs. This highlights the sector:s heavy reliance on private operators. Yet payment disruptions risk jeopardizing fuel imports and plant maintenance - particularly at major coal-fired plants whose operations require continuous, high-cost fuel supply.
One such project is Chattogram:s SS Power - an ultra-supercritical 1,320 MW coal-fired plant in Banshkhali. Its Chief Financial Officer Mohammad Ebadot Hossain Bhuiyan said: “We have not received payment since June. BPDB owes us more than Tk 3,500 crore. As a result, we are unable to pay EPC contractors, import coal, or finance maintenance.” Despite the crisis, SS Power is still delivering electricity at full capacity - but warns this may soon become unsustainable.
Historical Burden Still Haunting the Sector: Unpaid power bills began rising significantly during the final years of the Awami League government: At one point, total arrears exceeded Tk 50,000 crore
To break the deadlock, the government issued special bonds to clear delayed payments - a process that the interim administration accelerated after taking charge. One notable example was the emergency repayment of $437 million to India:s Adani Power by June 2025, which had triggered severe diplomatic and financial strain earlier. However, the underlying financial imbalance persists - with new arrears rising almost as fast as old arrears are settled.
Tariff Reform and Structural Fixes Now Unavoidable: Economists and energy experts argue that the recurring arrears crisis is a symptom of deeper structural weaknesses: Heavy reliance on imported fuel, Expensive long-term power purchase agreements, Low-cost retail tariffs creating chronic subsidy dependency, Delayed billing and governance inefficiencies.
BIPPA has warned that without timely tariff reforms, the debt trap will worsen. “Unless production costs are reflected in tariffs, arrears will continue and financial stability will collapse,” - BIPPA President David Hossain. Industry insiders further note that global lenders are increasingly reluctant to finance the sector unless transparency and financial discipline improve.
What Happens If the Crisis Continues: Energy analysts warn of potential consequences: Fuel supply disruptions and shutdowns of private plants, Load shedding during peak demand, Halt in new power investment, Ballooning bank defaults by private power companies, Increased consumer tariffs without service improvement,.
Private producers fear that without an urgent cash flow infusion from the government, plants could soon struggle to operate continuously - risking a dangerous return to the power shortages that plagued the country for years. Bangladesh:s power sector stands at a critical crossroads. While the interim government has made significant progress in clearing inherited debt, reduced subsidies and mismatched tariffs are now pushing the industry back toward insolvency. Without a long-term financial restructuring plan - including pricing reform, improved governance, and sustainable repayment mechanisms - the vicious cycle of arrears is likely to continue, putting the nation:s energy security and economic recovery at heightened risk.
