Govt moves to revise Rampal, Payra power tariffs using Matarbari rate as benchmark

Highlights:

• Government renegotiating Rampal and Payra tariffs using Matarbari benchmark
• Matarbari power costs Tk8.45, far below Rampal and Payra
• Review targets coal costs, efficiency, capacity payments, and contracts
• Subsidies to Rampal and Payra suspended amid renegotiation process
• Companies struggling with loan repayments and coal import financing
• Other plants face payment freezes over unapproved tariffs

Using the tariff of the Matarbari coal-fired power plant as a benchmark, the interim government has begun renegotiating electricity prices from the Rampal and Payra coal plants, which officials and experts say were set excessively high under the previous administration to favour power producers at the state's expense.

In April this year, the tariff for the 1,200MW Matarbari power plant was fixed at Tk8.45 per unit. By comparison, electricity from the 1,320MW Rampal plant costs Tk13.57 per unit, while power from the 1,320MW Payra plant is priced at Tk12 per unit.

To narrow this gap, the government is reassessing major cost components of the Rampal and Payra projects, including imported coal prices, fuel handling and logistics, maintenance costs, plant efficiency, capacity payments, debt servicing, and grid-connection charges, Power Division sources said.

Since assuming office in August 2024, the interim government has been reviewing power sector contracts signed by the previous government. In January, the Power Division formed a six-member committee to reassess coal power tariffs and contractual terms.

"The agreements for Rampal and Payra contain clauses that are unfavourable to the state and were clearly designed to benefit the companies," a member of the review committee told The Business Standard, requesting anonymity. "The interim government is now negotiating with the companies to revisit those terms, and proposals for revisions have already been placed before them."

Infograph: TBS

Tariffs for coal-fired power plants are typically calculated based on coal prices, import and transport costs, debt repayment schedules, exchange rate assumptions, construction and maintenance costs, generation efficiency, and grid-related expenses.

After concluding the Matarbari tariff revision in April, Power and Energy Adviser M Fouzul Kabir Khan said the Matarbari rate would serve as a reference point for more rational negotiations with other coal-based plants.

When asked about progress on Rampal and Payra, the adviser referred TBS to the power secretary. Power Secretary Farzana Momtaz said discussions with the two companies were continuing.

"The negotiation committee is working," she said. "These are binding contracts, so moving beyond the existing agreements is not straightforward. Still, we are hopeful of reaching a resolution."

According to Power Division officials, the renegotiation process has prompted the finance ministry to suspend subsidy disbursements to Rampal and Payra since May. As a result, both plants are reportedly facing difficulties in servicing foreign loans and opening letters of credit (LCs) for coal imports.

In a recent letter to the Finance Division, the Power Division said Payra Power Plant,  operated by Bangladesh-China Power Company Limited, accumulated Tk2,440 crore in unpaid subsidies between May and September, while Rampal Power Plant, run by Bangladesh-India Friendship Power Company Limited, accrued Tk1,554 crore during the same period.

Officials also confirmed that both companies have formally requested the Bangladesh Power Development Board (BPDB) to provide funds to open LCs for coal imports.

Payra is jointly owned by the governments of Bangladesh and China, while Rampal is a joint venture between India's NTPC and BPDB. In both projects, the government holds a 50% stake.

PPA terms leave little room for unilateral changes

Zahid Hussain, former lead economist at the World Bank's Dhaka office and a member of the interim government's contract review committee, said the Power Purchase Agreements (PPAs) for Rampal and Payra severely limit the government's ability to amend terms unilaterally.

"These contracts allow amendments only if one party violates the agreement," he told TBS. "Even then, the process is lengthy, involving negotiations, mediation and ultimately arbitration."

This means the government can realistically pursue revisions only through mutual agreement, he said.

"The contracts were drafted in an extremely one-sided manner, risks are borne almost entirely by the government, while profits accrue to the companies. These are textbook examples of crony capitalism," Zahid said, adding that renegotiation based on mutual interest would be more effective than confrontation.

BPDB, which purchases electricity from both plants, also holds equity stakes in them. Repeated attempts to contact BPDB Chairman Md Rezaul Karim for comment were unsuccessful.

More plants face payment freeze over tariff approvals

Separately, several power plants are facing payment delays after tariff approvals were issued without clearance from the Cabinet Committee on Government Purchase (CCGP) during the previous government.

Former state minister for power Nasrul Hamid Bipu approved electricity purchases and per-unit tariffs for four plants operated by Rural Power Company Limited (RPCL) and two plants run by BR Powergen Limited without obtaining CCGP approval.

The plants include RPCL's Mymensingh 210MW combined-cycle plant, Gazipur 52MW and Raozan 25MW dual-fuel plants, Gazipur 105MW HFO-fired plant, and BR Powergen's 150MW dual-fuel plants at Kodda (Gazipur) and Mirsharai.

As the approvals lacked CCGP clearance, the finance division initially withheld subsidy payments in April 2024. Tariff revisions began soon after and continued following the change in government in August.

While Tk1,600 crore was later released for the April 2024–April 2025 period, subsidy payments have again been suspended since May due to ongoing tariff negotiations. As of September, Tk1,020 crore remains unpaid—Tk490 crore for BR Powergen and Tk530 crore for RPCL.

BR Powergen Managing Director Md Ashraf Hossain said payments for the Mirsharai plant were withheld because the PPA has yet to be signed, while the Kodda plant's tariff is still under revision.

"Without subsidy payments, we are running operations through bank borrowing," he said.

RPCL Managing Director AHM Rashed declined to comment.

The Power Division has placed the issue before the Cabinet Committee on Economic Affairs. Officials said tariffs for three of the plants have already been approved, while approval for the remaining three is under process.