This is why PDB faces fund crisis to pay private power producers

Originally posted in The Business Standard on 7 May 2022


  • Each month, BPDB purchases electricity worth Tk3,500 crore
  • BPDB is supposed to pay the bill within 30 days of bill submission
  • Private producers are yet to receive December’s bill
  • BPDB faces payment backlog as power generation cost increased following oil-based production due to gas shortage
  • It wants electricity price hike or budgetary support to overcome fund crisis

Volatile fuel prices have started to hit Bangladesh’s power generation sector as the Bangladesh Power Development Board (BPDB) is facing fund crunch in paying electricity bills to private producers.

Sitting over a payment backlog of four months following an increase in the purchase cost from oil-based private power plants, the state-owned single buyer of electricity now wants either another hike in bulk electricity tariff or regular budgetary support to smoothen the power purchase and supply process.

Speaking about the fund crunch, SK Aktar Hossain, member (finance) at the BPDB, said the power purchase cost from petroleum-based plants has increased following the recent hikes in prices of fuel oil. Besides, the budget support from the Finance Division also got delayed, he added.

“Nonetheless, we have started to clear the dues,” he said.

Generally, 22.52% of the country’s total electricity consumption comes from furnace oil and diesel-based plants, and more than 60% comes from gas-based plants.

For purchasing electricity from private producers, the BPDB spends around Tk3,500 crore every month.

But, the share of the oil-based electricity has increased to meet the growing power demand caused by warmer weather.

Reliance on oil-based electricity also has increased in the wake of gas supply shortage in the pipeline, and oil-based generation always impacts the power purchase cost.

There are 53 private power producers in the country that supply almost 50% of daily demand including imported electricity from India. Summit Group, United Group, Orion Group and Confidence are among the top private producers.

BPDB’s data show that the generation cost of one unit of gas-based electricity ranges between Tk1.20 and Tk3.50, the cost of producing one unit of furnace and diesel oil-based power is between Tk12 to Tk16.

Meanwhile, a hike in diesel price in November last – from Tk65 to Tk80 per litre, further increased the cost of oil-based power generation.

As per the power purchase agreement, the BPDB is supposed to pay electricity bills to the private power station owners within 30 days of the bill issuing date.

Due to four months’ payment dues, the power producers also are facing troubles in bearing the operational costs and repaying bank loans taken against the power plants, said some power plant owners, urging the BPDB to clear the dues immediately.

Imran Karim, president of Bangladesh Independent Power Producers’ Association (BIPPA), said generally, the BPDB makes the payment within a maximum of 45 days following the bill issuing date.

“This time, it is a bit delayed. However, the BPDB is disbursing the payment gradually. Now we are receiving the December bill,” he said.

Currently, the country is consuming around 14,716 megawatts of electricity against a capacity to produce 22,348 megawatts.