Dues cleared till Dec '24, govt still owes Tk 130b

A massive amount of subsidies in the revised FY25 budget have given the interim government a big respite as it has already cleared a good amount of overdue payments to the private sector power producers, officials said on Saturday.

Till early this month, the government released Tk 460 billion in subsidies, which helped clear the outstanding capacity charges and other dues to the independent power producers (IPPs) up to December 2024 for supplying electricity to the national grid, they said.

Gradually, the government would be paying all the arrears and overdue payments to the IPPs by the next fiscal year, said officials at the Ministry of Finance (MoF) and Power Division.

The government owed the IPPs and the private-sector rental power plants nearly Tk 130 billion till last month, as per the data collected by The Financial Express from the Power Division and the finance ministry's reports on the payment obligations.

From the conflated statistics, it was found that the government had cleared arrears and outstanding bills, including capacity payments, to the IPPs and private rental power plants till December last year.

The Prof Muhammad Yunus-led administration has decided to clear all the outstanding capacity charges, power purchase bills, and other overdue payments to the local and foreign IPPs and rental electricity producers, including India's Adani Power, Bangladesh-China Power Company Plant (Payra power plant), Meghnaghat 450MW Power Ltd, 210MW Rural Power Co Ltd, 335MW Summit-Meghnaghat Power Ltd, 414MW Sembcorp NWPC Ltd, 145MW Aggreko International Projects, United Power, and Doreen Power.

 "We are hopeful of paying the maximum amount of arrears and bills to the local and foreign electricity suppliers within this fiscal year. Then, we will pay the entire amount of the outstanding bills within the next fiscal year," said a senior Power Division official.

A finance ministry official told The Financial Express they had already released Tk 460 billion out of Tk 620 billion subsidies, kept aside in the revised national budget for FY25 to clear the arrears and overdue payments to the IPPs.

The remaining amount would be released based on the demand of the Bangladesh Power Development Board (BPDB) in the coming days, he added.

Meanwhile, the government increased budgetary subsidies to Tk 620 billion in the FY25 budget as it wants to pay the accumulated arrears to the private-sector power producers by the next fiscal year.

The outlay in the original national budget for FY25 for the payout to the independent power producers, contracted  by the ousted Awami League government, was Tk 360 billion, which was later increased to Tk 620 billion in the revised budget.

"We are paying the arrears every month to the private power plant owners. But the arrears are comparatively higher than our monthly payments. So, we will allocate a higher amount of money in the revised national budget for FY25," another finance ministry official said.

From the next FY26, the Power Division would slash subsidies for the power sector drastically and try to ensure loss-free supply within the next few years, he said.

The government purchases power at higher rates from the costly IPPs and the rental power producers and then sells it to the consumers at lower rates through subsidies.

Another finance ministry official said Bangladesh wants to be a liability-free country to the IPPs and private power plants from the next fiscal year as it has agreed with the International Monetary Fund (IMF) to receive financial support.

In the last FY24 revised budget, the government allocated Tk 394.06 billion in subsidies for the power sector.

Data from the finance ministry, BPDB, and a non-government research organisation shows a total of Tk 783.7 billion had been paid in capacity charges from FY19 to FY23.

Some Tk 62.41 billion was paid in FY19, Tk 89.29 billion in FY20, Tk 132 billion in FY21, Tk 240 billion in FY22, and Tk 260 billion in FY23 in capacity charges for private and rental power plants.

Such huge capacity payments to the IPPs and rental plants have become a big burden for the government while struggling with dwindling foreign exchange reserves and rising external debts.

Banks are unable to provide dollars to repay the dues of foreign companies in the power and energy sector. Bangladesh had reserves of over $48.0 billion two years back, which have depleted to $22 billion in recent days.

The toppled Sheikh Hasina regime in its three terms had paid a total of Tk 1.05 trillion to 82 IPPs and 32 rental power plants in capacity charges or rental payments.

Most of the IPPs and rental plants are HFO- or diesel-based, which is costly for generating electricity.

The power development board purchases electricity from the private sector plants at costs that vary from Tk 14 to Tk 26 per kilowatt hour (kwh) for supplying to the national grid.

On the other hand, the average retail price of electricity paid by consumers is some Tk 8.95 per unit and the average bulk electricity tariff is Tk 7.04 per unit.

Meanwhile, the government paid a total of Tk 280 billion in capacity charges in FY2023 to the favoured power producers.

It has also issued special bonds worth Tk 50 billion in recent months to clear capacity charge payments to the IPPs and rental plants.

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