Bangladesh's decision to provide Tk60 billion in loans to the Bangladesh Power Development Board (BPDB) for importing fuel for oil-fired power plants has yet to produce the expected increase in electricity generation, with fuel shortages and delays in imports limiting plant operations.
The government had increased its reliance on furnace-oil and diesel-fired plants to compensate for reduced generation from gas-fired power plants amid an acute gas shortage. However, many liquid-fuel-based plants have failed to import the required fuel despite receiving financial support, raising concerns within the Power Division about whether the funds are achieving their intended purpose. The government had set a target of generating an average 4,000 megawatts (MW) a day from publicly and privately owned liquid-fuel-based power plants during the current summer season. But delays in fuel imports and supply shortages have made it difficult to meet the target.
At a meeting on September 21, State Minister for Power and Energy Anindya Islam Amit reportedly expressed dissatisfaction over the situation and sought detailed information on how the Tk60 billion had been distributed, how much fuel had been imported against the funds and how much was still awaiting import. He also questioned the rationale for providing the money if consumers were not receiving the expected benefits through increased electricity generation.
Fuel import delays hamper generation: The Tk60 billion was provided to BPDB to facilitate fuel procurement for liquid-fuel-based power plants. The amount is scheduled to be adjusted against power-sector subsidies allocated by the Finance Division between March and June 2027.
However, officials told the meeting that several plants had either opened letters of credit (LCs) to import fuel, completed imports or were still in the process of opening LCs. Officials were instructed to maintain regular communication with banks and shipping companies and closely monitor fuel shipments. The ministry also directed authorities to make alternative arrangements for power producers that do not have the capacity to import fuel independently.
BPDB Chairman Engineer Rezaul Karim attributed the delays partly to disruption in international fuel trade. “Fuel oil imports are being disrupted for various reasons amid the Middle East crisis. Most buyers are now trying to import through Singapore, and as a result, it has become difficult to secure vessels on time,” he told The Daily Industry. He said furnace-oil-based power plants would begin importing fuel and increasing generation in line with the target soon.
September fuel requirement exceeds supply: The scale of the fuel shortage has become particularly evident in September. According to Power Division sources, liquid-fuel-based power plants required around 630,000 tonnes of fuel oil during the month. Of this, demand for 204,100 tonnes was placed with the Bangladesh Petroleum Corporation (BPC). BPC said it would supply 163,000 tonnes during September. That leaves a shortfall of 41,100 tonnes compared with the demand submitted to BPC.
Government-owned power companies have also taken steps to import fuel independently, according to officials who attended the meeting. The shortage is particularly significant because the government is relying more heavily on oil-fired generation while gas shortages continue to constrain gas-based plants.
5,331MW furnace-oil capacity: According to information presented at the meeting, Bangladesh has a total installed generation capacity of 28,526MW.b Of this, furnace-oil-fired plants account for 5,331MW, while diesel-fired plants have an additional capacity of 768MW.
For September, authorities had set targets for liquid-fuel-based plants to generate as much as 2,180MW during the daytime peak and up to 4,270MW during the evening peak.However, officials said inadequate fuel supplies and delays in imports had emerged as major obstacles to meeting those targets. Power Secretary Ms Mirana Mahruhk reportedly instructed officials to ensure that the generation target was achieved during the remaining days of September.
Energy minister questions effectiveness of funding: A BPDB official who attended the meeting said the state minister expressed dissatisfaction over the failure to achieve the targeted generation. The official said electricity demand was higher this year than last year, while the ongoing gas shortage had increased the need for oil-fired generation.
The government therefore provided Tk60 billion to facilitate fuel purchases, but consumers had yet to receive the expected benefits from the expenditure. The official said the meeting noted that although power plants received funds at the beginning of September to import fuel, most had not yet succeeded in bringing in the required quantities.
Questions over costly oil-based generation in winterThe meeting also raised questions about the economic justification for purchasing expensive electricity from liquid-fuel-based plants during the winter, when electricity demand is expected to decline. Plants capable of importing fuel independently were advised to arrange their own imports during periods of lower demand, particularly in winter.
Officials were also instructed to develop a month-by-month strategic plan for increasing generation from liquid-fuel-based plants during next summer, Ramadan and the irrigation season, when electricity demand is expected to rise. A detailed report covering fuel imports, current stocks, LCs opened, fuel awaiting shipment and vessel information will be presented at the next meeting.
Dispute over liquidated damages: The meeting also discussed the possibility of imposing liquidated damages (LD) on some companies that failed to supply electricity according to requirements because of fuel shortages.
Officials noted, however, that LD provisions could create a situation in which companies face difficulties importing fuel on time. The authorities ordered a legal review of the issue before taking further action. The debate highlights a broader challenge facing Bangladesh's power sector: ensuring adequate generation while controlling the rising cost of fuel-based electricity.
Generation remains below demand: Data published on the website of Power Grid Company of Bangladesh (PGCB) showed that at 4pm on Sunday, electricity demand stood at 15,138MW against generation of 14,930MW. Gas-fired power plants generated 5,233MW, while oil-fired plants generated 3,233MW. Coal-fired plants contributed 4,646MW, with the remainder coming from hydropower, solar, wind and electricity imported from India.
The figures indicate that oil-fired generation has become an important component of the national power supply as gas shortages continue to restrict gas-based generation. However, the failure to secure sufficient fuel despite the Tk60 billion financing facility has raised questions over procurement efficiency and the effectiveness of the government's strategy. The demand expected to rise again during the next summer, Ramadan and the irrigation season, officials now face pressure to secure fuel supplies in advance while avoiding excessive reliance on expensive oil-based electricity and further increasing the subsidy burden.
