Electricity prices on edge as subsidy strain mounts amid war-driven fuel shock

As fuel import costs rise, officials debate tariff hikes, though the energy minister refuses to confirm any immediate price rise

Amid rising fuel import costs triggered by the Middle East conflict, Bangladesh is weighing three proposals to raise wholesale and retail electricity tariffs.

The move comes as subsidy pressure intensifies across the power sector.

Yet on Saturday, Power Minister Iqbal Hassan Mahmood Tuku remained non-committal on any immediate price hike.

“It has not increased yet,” he said when asked whether electricity prices would go up.

Pressed again later, he repeated: “I already said it has not increased yet. When it does, I will let you know.”

Tariff Options Under Review

A power, energy and mineral resources ministry summary prepared for presentation to a cabinet committee in early April outlines three options proposed by the Bangladesh Power Development Board (BPDB) for adjusting average wholesale tariffs.

The proposals include hiking the current Tk 7.4 per unit wholesale rate by:

• Raising by Tk 0.5 to Tk 7.54

• Raising by Tk 1 to Tk 8.4

• Raising by Tk 1.20 to Tk 8.24

Corresponding increases in retail tariffs are also included in the proposals.

The document notes that although the government had pledged not to raise power and energy prices for two years after taking office, the situation changed after the outbreak of war in the Middle East on Feb 28.

Since then, imports of LNG, furnace oil and diesel have faced disruption, driving up electricity generation costs and increasing subsidy pressure.

Subsidy Gap Widens Sharply

According to the ministry note, maintaining current tariffs could create a BPDB deficit of Tk 564.75 billion in FY2025–26. Rising global fuel prices could widen the gap further.

Under the proposals, subsidy savings would vary depending on the increase:

• Tk 0.5 hike: subsidy reduced by Tk 52.44 billion

• Tk 1 hike: reduced by Tk 104.89 billion

• Tk 1.20 hike: reduced by Tk 125.86 billion

Officials argue that without price adjustments, sustaining supply would place a heavy burden on national fiscal management.

Power Shortfall and Fuel Crunch

Recent BPDB data shows persistent gaps between demand and generation.

• Apr 13: demand 15,300MW, generation 14,196MW, load shedding 1,008MW

• Apr 14: demand 14,799MW, generation 14,080MW, load shedding 688MW

• Apr 15: demand 15,398MW, generation 13,849MW, load shedding 1,482MW

Gas shortages remained the biggest constraint, limiting more than 5,600MW of capacity daily. Coal shortages and maintenance shutdowns further reduced output.

Lifeline Users Shielded, Others Face Hikes

The proposal exempts lifeline users consuming up to 75 units.

However, residential consumers using more electricity may face increases of Tk 0.70 to Tk 1.80 per unit, while commercial, industrial and institutional users would also see revised rates.

The document cites regional examples, noting that Sri Lanka and Singapore have raised electricity prices due to energy cost pass-through mechanisms.

It also references IMF recommendations from 2025 urging efficiency improvements, subsidy reduction, and targeted protection for low-income consumers.

If approved, one of the three wholesale tariff options will be sent to the Bangladesh Energy Regulatory Commission (BERC) for public hearings before implementation through a gazette notification.