Bangladesh’s annual power subsidies could exceed 60,000 crore taka and electricity shortages rise above 4,000 megawatts if the country suffers another major LNG supply disruption, according to a new policy brief by the Panam Institute.

The newly minted Dhaka-based think tank, which began its journey in July, said Bangladesh’s power crisis is no longer primarily a shortage of generation capacity but one of fuel availability and financing.

Bangladesh has nearly 28,900 MW of grid-connected generation capacity but has never generated more than 17,200 MW, the institute said. Gas supply stood at 2,334 million cubic feet per day (MMCFD) on Sept. 5 against demand of about 4,000 MMCFD.

The fuel shortage has left gas-fired plants operating below capacity while forcing greater dependence on expensive furnace oil. Electricity generated from furnace oil cost about 27.50 taka per unit in fiscal 2024-25, compared with an average generation cost of 12.10 taka, according to the brief.

The financial burden has continued despite higher electricity tariffs. Power subsidies amounted to at least 62,000 crore taka in 2024-25, partly reflecting the clearance of earlier arrears, and about 43,000 crore taka in 2025-26.

Capacity payments — made to power producers regardless of how much electricity their plants generate — reached about 48,261 crore taka last fiscal year and are projected to rise to 52,608 crore taka in 2026-27.

Panam Institute estimated that private power producers have received about 1.78 lakh crore taka in cumulative capacity payments since 2009-10.

The payment chain has also come under pressure. As of April 9, power-sector entities had accumulated about 52,300 crore taka in unpaid bills, including 11,634 crore taka owed to Petrobangla and 3,892 crore taka to Indian electricity exporters.

The institute linked the current situation to power and fuel policies pursued between 2010 and 2024, including contracts awarded without competitive bidding, capacity-payment arrangements, growing reliance on imported LNG and insufficient domestic gas exploration.

Domestic gas production has been declining since 2016-17. A four-year drilling programme added only 126 MMCFD against a target of 353 MMCFD, according to the report.

The vulnerabilities became more apparent this year after disruptions to LNG supplies from the Gulf and a July fire at an LNG terminal off Moheshkhali.

The terminal disruption removed roughly 450 MMCFD from the system and contributed to power shortages of between 2,000 MW and 3,000 MW in August.

Panam Institute warned that under a severe scenario involving another LNG supply disruption, a terminal outage and spot LNG prices above $30 per MMBtu, gas availability could fall below 2,200 MMCFD.

Such a combination could push the electricity shortfall above 4,000 MW and annual subsidies beyond 60,000 crore taka, while mounting arrears could lead to defaults or arbitration disputes.

Even without another major shock, the institute projected annual power subsidies of 45,000-55,000 crore taka through June 2028 under existing policies, with unscheduled peak power shortages ranging between 1,500 MW and 3,000 MW.

The institute recommended a three-year tariff and subsidy plan, competitive bidding for new power and LNG infrastructure, publication of power and LNG contracts, clearer gas-rationing priorities and accelerated domestic gas exploration.

It also called for an escrow mechanism to ensure payments to electricity generators and urged the government to address the sector’s financing problems before adding further generation capacity.

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