Bangladesh Power Development Board ended FY2024-25 with a revenue shortfall of Tk 55,660 crore (BDT 556.6 billion, approximately $4.55 billion), an 18.3% deterioration from the prior fiscal year. The unit economics are straightforward: BPDB recovers roughly BDT 5/kWh less than it costs to generate and transmit electricity. Sector expenses grew at 13.94% year-on-year while sales revenue grew at only 9%, compressing the margin with every additional kilowatt-hour sold.

The government injected BDT 386 billion (Tk 38,600 crore, ~$3.16 billion) as direct subsidy, covering 69% of the gap. The remaining 31% -- Tk 17,000 crore -- accumulated as payment arrears to independent power producers (IPPs), with the BPDB's IPP backlog exceeding Tk 25,000 crore by end-FY25. Producers cannot exit their capacity payment contracts, but they also cannot service imported coal and LNG without payment. The result is a self-reinforcing illiquidity loop: BPDB delays payments, IPPs idle or reduce output, BPDB is forced to run higher-cost peakers to compensate, and unit costs rise.

Three structural factors drive the shortfall and are not resolved by subsidy injections alone. First, Bangladesh built capacity ahead of demand: quick-rental and coal plants with long-term capacity payment obligations sit partially idle while the grid still cannot match peak demand in summer. Second, baseload coal plants -- Payra (1,320 MW) and Matarbari (1,200 MW design) -- have faced coal supply and dispatch constraints, leaving the grid dependent on liquid fuel peakers priced at $0.15-0.25/kWh. Third, BERC-regulated retail tariffs have not adjusted at the pace of cost escalation.

Petrobangla: The Hidden Escalation

Petrobangla's gas subsidy burden has accelerated independently of BPDB's power shortfall. The corporation received Tk 8,900 crore in government subsidy for gas and LNG imports in FY2024-25, up 48% from Tk 6,000 crore in FY24. Across five fiscal years (FY21 through FY25), cumulative government subsidy transfers to Petrobangla total approximately Tk 36,712 crore.

The structural driver is Bangladesh's depleting domestic gas reserves. As local fields decline, Petrobangla imports spot and term LNG at prices persistently above USD 10/mmBtu. The corporation spent approximately $3.27 billion in just seven months of FY25 meeting LNG and foreign payment obligations. Middle East supply disruptions in 2026 have introduced a new price floor risk: Daily Star reported that Bangladesh faces an additional $1.07 billion in LNG subsidy exposure given current spot price trajectories.

Petrobangla has separately sought up to Tk 26,000 crore in emergency subsidy facilities for FY26 to sustain gas supply through summer peak demand. The total potential subsidy call from BPDB and Petrobangla combined for FY2025-26 exceeds Tk 65,000 crore -- approximately 7% of the FY26 national budget.

BPC: The One Reform That Worked

The Bangladesh Petroleum Corporation's shift to automatic market-based fuel pricing in March 2024 is the most significant SOE financial reform successfully implemented. BPC, which had incurred catastrophic losses on subsidized diesel and kerosene during the 2022-23 global commodity price spike, now sets retail prices by formula tied to import cost. Diesel is priced at Tk 102/litre and kerosene at Tk 114/litre (effective January 2026), reflecting actual cost recovery. BPC is no longer systematically loss-making.

The lesson is direct: formula-based automatic pricing removes the political decision from each tariff adjustment cycle, insulates the SOE from discretionary subsidy dependence, and allows fiscal planning to proceed without open-ended contingent liabilities. Neither BPDB nor Petrobangla has an equivalent mechanism. BPDB's retail tariffs remain subject to BERC regulatory hearings and government approval, creating the political bottleneck that sustains the subsidy trap.

Biman: A Structural Outlier

Biman Bangladesh Airlines presents a more nuanced picture. In FY2023-24, Biman recorded an operational profit of Tk 1,556 crore on record revenues of Tk 10,575 crore. However, foreign exchange losses of approximately Tk 1,400 crore -- driven by the taka's depreciation against the dollar under which aircraft leases and fuel payments are denominated -- cut the audited net profit to Tk 282 crore. Biman is not in the same structural loss category as BPDB or Petrobangla; it is profitable at the operating level but exposed to FX risk from its hard-currency obligations. In FY2024-25, Biman posted a record net profit of Tk 785 crore, confirming the FY24 FX loss was a transition impact rather than a chronic structural failure.

IMF Conditionality and the SOE Reform Agenda

The IMF's $5.5 billion ECF/EFF/RSF programme has embedded SOE financial reform as an active structural benchmark. IMF Country Report No. 25/150 (June 2025) calls for a comprehensive approach to rein in electricity sector subsidy expenditures. Structural benchmarks include publication of an SOE sector report covering the 40 largest SOEs (completed early 2025) and an integrated SOE database covering 71 of 120 SOEs. The Article IV consultation (PR26029, January 2026) flagged limited reform progress in public finance as a risk factor.

The sixth IMF tranche (~$400M, expected June 2026 after 5th review board completion) is the near-term disbursement in play. While prior actions for the 3rd/4th reviews centered on tax revenue mobilization and exchange rate reform rather than SOE subsidy directly, the structural benchmark architecture places electricity subsidy rationalization on the board-level evaluation checklist. Sustained failure to narrow the BPDB shortfall will be visible in fiscal data reviewed at each "

subsequent tranche assessment.

The BNP Political Constraint

The BNP government took office on February 17, 2026, with an explicit commitment to avoid power tariff increases for at least two years. The Energy Minister stated publicly that system loss reduction -- not tariff hikes -- would be the mechanism to address BPDB's financial position. A Tk 0.50/kWh wholesale hike would reduce subsidy requirements by ~Tk 5,000 crore; a Tk 1/kWh hike by ~Tk 10,000 crore; a Tk 1.20/kWh hike by ~Tk 12,500 crore.

By May 2026, BPDB had proposed a 17-21% wholesale tariff increase, with Power Division officials stating the increase would protect lifeline consumers (under 75 kWh/month) while passing costs to higher-usage slabs. BERC has commenced public hearings. The political cost of this reversal is calibrated against a specific voter memory: the Awami League government raised cumulative lifeline tariffs by 17.5% between January 2023 and February 2024, a key grievance that the BNP campaign explicitly addressed. Whether the BNP government absorbs that political cost or defers to continued subsidy expansion is the central fiscal policy choice of the current administration's "

first year.