Govt inherits Tk50,000cr in power and energy dues, plans special bond for payment relief

The government's outstanding debt in the power and energy sector has soared to a record of nearly Tk50,000 crore with around Tk45,500 crore accrued in the electricity sector alone from August last year to October this year, exceeding the current fiscal year's budget allocation by over 30%, a finance division official says.

Tk3,500-4,000 crore in new dues are added each month to the bill. However, with limited revenue collection, the Finance Ministry has only been able to pay down between Tk1,500-2,000 crore monthly, according to the official who wished to remain anonymous.

To manage the outstanding payments, the ministry is planning to issue a Tk5,000 crore bond hoping to stabilise at least some of the overdue payments, said the official.

One of the biggest creditors is India's Adani Group with an outstanding balance of around $840 million, translating to over Tk10,000 crore. 

The government has been prioritising Adani's dues, paying the company $204 million since July, including $97 million last month and $10 million in the first four days of November. 

However, Energy Adviser Muhammad Fouzul Kabir Khan has said the government will not be overly concerned if Adani chooses to halt supply.

"Adani's power plant is only one of Bangladesh's many sources of electricity and the government has no special agreements binding it to these suppliers," he told The Business Standard.

To reduce outstanding bills to zero within the next two years, Petrobangla and Bangladesh Petroleum Corporation are paying creditors slightly more than the monthly billing amount, energy officials said. 

However, due to negative growth in revenue collection, the finance ministry and power division have been unable to formulate a similar plan to reduce outstanding dues in the power sector.

Officials added that Tk2,000 crore was released last month for power sector dues which helped cover a portion of the outstanding bills from August of the previous fiscal year.

Though the budget allocated Tk35,000 crore in subsidies for the power sector for the current fiscal year, reduced revenue collection will likely limit the finance ministry's ability to release the entire amount. 

Officials estimate that Tk20,000-22,000 crore will be paid over the fiscal year, leaving the rest unmet.

Mahbub Ahmed, former senior secretary of the finance ministry, said, "The mountain of dues in the power sector has no immediate solution. It's a difficult position where any relief in one area creates pressure elsewhere." 

He called for cutting unnecessary projects to free up funds for the power sector and emphasised reducing inefficiencies and corruption within the sector to limit expenditure.

"Raising electricity prices at this point is not feasible given the pressure on the public and businesses. We must focus on boosting revenue collection while avoiding unnecessary projects in the sector," Ahmed further said.

Debt reduction plans

The process of issuing Tk5,000 crore special bond has already started with the bond expected to launch shortly to address part of the dues owed to private power companies, finance officials said.

Last fiscal year, bonds worth Tk15,000 crore were issued to address power sector dues. However, these low-interest bonds failed to attract significant investment from banks many of which face liquidity issues. 

The finance ministry is preparing to release a Tk5,000 crore bond to offer some short-term relief, added the officials.

They also said the Tk1,500-2,000 crore will be released per month from the budget.

Meanwhile, outstanding payments for Chevron-supplied gas, LNG imports, and fuel oil imports amount to nearly $370 million, which is around Tk4,400 crore. 

Of this total, dues for fuel oil imports are around $40 million, Chevron's dues stand at $120 million, and LNG import dues are approximately $110 million.

The interim government has already increased Chevron payments to lower some of these balances, officials mentioned.

Adviser Fouzul Kabir Khan said the external debt of the power and energy sector was $2.8 billion when the current government took office. "Now it stands at $1.5 billion. We will continue to address these dues without excessively depleting foreign reserves."

He said the government has been working to pay foreign creditors while safeguarding reserves. "Foreign currency reserves, already impacted by mega projects like the Padma Bridge, are a critical resource for debt servicing which must now be managed judiciously."

"Despite the challenges, we are meeting our obligations to creditors," the adviser added.

Impacts on power production 

Currently, 28 of the country's 177 power plants are closed for maintenance while another 55 are not producing power at all as per data from the Power Development Board's website on 4 November. 

The ongoing coal shortage has heightened the problem with power plants that depend on imported coal being unable to operate at full capacity due to limited foreign currency for imports.  

The country's seven coal-based power plants have a combined production capacity of about 7,000MW, but due to coal supply issues, these plants are currently operating at about half capacity. 

The shortage has particularly impacted the Maheshkhali power plant in Cox's Bazar which has been offline since 31 October due to coal shortage. This plant alone contributes 1,200MW, a crucial component of Bangladesh's power grid. 

Meanwhile, maintenance work has suspended operations at a 307MW power plant in Barguna since 27 October further affecting grid stability.

Production has also dropped at the Barapukuria coal-based power plant where one of three units remains shut due to limited coal supply. The two remaining units are operating at a reduced capacity of 220MW-230MW out of a potential 525MW.