Power division allocation cut by 30%, energy gets 100% boost
- Power division got Tk 20,342cr, which was Tk 29,177cr last fiscal
- Energy division got Tk 2,178cr, which was Tk 1,086cr last fiscal
- Subsidy Tk 37,000cr, which was Tk 40,000cr last fiscal
- Govt aims to save Tk 11,000cr by reducing production cost
- Major focus in Grid strengthening; Rooppur power evacuation
- Target to drill 17 gas wells
The power division received around 30 percent less allocation in the FY26 budget compared to the previous fiscal year, while the energy division saw nearly a 100 percent increase.
The government has decided to cut electricity production costs by approximately 10 percent in a bid to ease the subsidy burden on the power sector, said Finance Adviser Dr Salehuddin Ahmed in his budget speech yesterday.
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"If the plan can be implemented, it is estimated that the cost of electricity subsidy of more than Tk 11,000 crore will be saved. We are reviewing the power purchase agreements and have taken the initiative to conduct energy audits to reduce the cost," he said.
The FY26 budget allocated Tk 37,000 crore in subsidies for the power sector, compared to Tk 40,000 crore last fiscal, which rose to Tk 62,000 crore in the revised budget as the interim government paid most of the arrears.
The finance adviser said initiatives have been taken to increase oil and gas exploration to ensure energy security through domestic efforts. At the same time, steps are being taken to develop cost-effective and sustainable infrastructure to help control energy prices. He added that the government has decided in principle not to increase power tariffs at the moment, considering the prevailing high inflationary pressure.
The power division got Tk 20,342 crore in the new budget, down from Tk 29,177 crore in the last fiscal. However, in the revised budget, the allocation was reduced to Tk 21,651 crore, according to budget documents.
The interim government did not initiate any new power plants, but allocated most of the funds to strengthening the grid network and distribution lines across six divisions. Aiming to start commercial operation of the first unit of the 1,200MW Rooppur Nuclear Power Plant in December this year, one of the major focuses is on power evacuation.
Among the companies under the power sector, Power Grid Bangladesh PLC is receiving the highest allocation of Tk 8,122 crore, followed by the Bangladesh Rural Electrification Board, which is getting Tk 2,744 crore. Under the REB, a project to modernise distribution systems in Dhaka-Mymensingh divisions is receiving Tk 1,460 crore. An unreconstructed gas pipeline for a gas-fired power plant from Dhanua to Mymensingh is getting Tk 101 crore.
Ongoing projects including the 1,200MW Matarbari coal-based power plant, the 800MW gas-fired Rupsha plant, and the 150MW HSD-based Syedpur power plant have received allocations. A 100MW solar power plant in Madarganj, Jamalpur is getting Tk 673 crore in FY26. Along with this, other solar plants with a combined capacity of 210MW have received allocations under the Rural Power Company Limited and B-R Power Generation Company.
"One of our major focuses is to increase the share of renewable energy-based electricity generation," said the budget speech, adding that around 3,400MW of electricity will be added to the national grid from clean sources by 2028, including that from the Rooppur plant.
The government is updating the Renewable Energy Policy 2008 to make it more relevant to current times, and the revision is now in its final stage, the finance adviser said.
Meanwhile, the energy and mineral resources division received an allocation of Tk 2,178 crore in the new budget, up from Tk 1,086 crore in the previous budget. It was revised to Tk 1,053 crore in FY25.
The government plans to drill at least 17 gas wells -- both exploratory and development -- under Petrobangla in the upcoming fiscal year. In addition, BAPEX will conduct a 90-line kilometre geological survey, a 700km 2-D, and a 450km 3-D seismic survey during the period.
Under Petrobangla, a total of seven exploration wells and 13 development wells were drilled over the past three years, according to the budget documents. The target for the ongoing fiscal year was 13 wells, of which only five were completed.
The government also plans to import 6.5 million tonnes of liquefied natural gas (LNG) to meet rising demand, up from 5 million tonnes in the current fiscal.
To reduce power generation costs, the government has exempted VAT on LNG imports and reduced the tax deduction at source during electricity purchase payments to 4 percent from 6 percent, said the finance adviser.
"To keep petroleum product prices stable, we are proposing to reduce the duty rates on the import of both crude and refined fuel, and to withdraw the tariff value on these products," he said.
The finance adviser also said initiatives have been taken to expand the country's lone fuel refinery by establishing the second unit of Eastern Refinery Limited, which will have a capacity of 3 million metric tonnes.
A study conducted last December by the Institute for Energy Economics and Financial Analysis (IEEFA) proposed a 10 percent reduction in power generation costs to save around Tk 13,800 crore annually by addressing core inefficiencies.
IEEFA's lead energy analyst for Bangladesh, Shafiqul Alam, said it is encouraging to see the government enhance its focus on the energy sector. "But the sector has huge system losses, which should be cut down to zero," he said.
He said the government's shift towards renewable energy remains slow, pointing out that high VAT and other taxes on solar panels have not yet been reduced. "We expected the high VAT-taxes would be reduced to increase renewable energy usage," he said.
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