Bangladesh government negotiating private power contracts amid cost concerns

Bangladesh faces significant challenges in managing its energy sector, particularly with contracts involving private power companies. Energy Minister Iqbal Hassan Mahmood explained that these agreements, often backed by sovereign guarantees, make unilateral cancellation lengthy and complex. He noted that the previous administration handed over several power plants to private entities under such guarantees.

The government is actively engaged in negotiations with these private power producers to mitigate costs and avoid substantial late payment fees. "We are trying to negotiate with them on several issues, particularly late payment fees, which we are refusing to pay. Hopefully, these discussions will be fruitful," Mahmood told parliament. He emphasized that once a power plant is operational, contracts cannot be easily altered, making price reduction and affordable electricity the primary goals as long as agreements remain valid.

Mahmood also addressed the issue of quick rental power plants, stating that none are currently in operation and no active contracts exist. However, two rental plants had their contracts renewed on a "no electricity, no payment" basis. The country is also grappling with a considerable gas deficit, with daily demand of around 3,800 million cubic feet unmet by the current supply of about 2,700 million cubic feet, leading to disruptions.

Furthermore, the Bangladesh Petroleum Corporation (BPC) is incurring daily losses of Tk 78 crore from the sale of diesel, octane, and petrol due to international fuel prices remaining above the break-even level, despite a recent decline following geopolitical tensions. Total BPC losses between March and June 23 amounted to Tk 18,699 crore. The minister indicated that domestic fuel prices might be reduced if international prices fall further to a sustainable level, aiming to ease public hardship.

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We are trying to negotiate with them on several issues, particularly late payment fees, which we are refusing to pay. Hopefully, these discussions will be fruitful.