IPP status scrapped, 3 power plants asked to return Tk1,500cr gas supply concessions

Highlights:

• Interim government reclassified three power plants as captive, not IPPs
• Meghna and United Groups owe about Tk1,500 crore in arrears
• Captive gas rates are double IPP rates, driving large back payments
• Meghna took the issue to court; United paid partially and appealed
• Reclassification followed court and regulatory findings under Gas Act 2010
• Both firms warn captive rates could cause severe financial strain

The interim government has initiated a move to recover around Tk1,500 crore in unpaid gas bills from Meghna and United Groups after reclassifying three of their power plants as captive units rather than independent power producers (IPPs).

Officials at the Energy and Mineral Resources Division said letters were issued on 2 March instructing both groups to pay arrears accrued over the past eight years, recalculated at captive gas rates.

A captive plant mainly generates electricity for its own use or for specific associated industries, whereas an IPP supplies power to the national grid or distribution utilities. Under the current tariff structure, captive producers pay Tk31.50 per cubic metre of gas—double the Tk15.50 rate for IPPs. Officials said this price gap has remained proportionally consistent over time.

Under the revised billing, Meghna Group's Everest Power plant in the Meghna Economic Zone, Narayanganj, owes Tk754 crore, while United Power Generation and Distribution Company Limited owes about Tk750 crore for its two plants at the Dhaka and Chattogram Export Processing Zones (EPZs).

Both groups have challenged the reclassification. United has paid part of its arrears and is seeking redress from the authorities, while Meghna has taken the matter to court.

Energy Adviser Muhammad Fouzul Kabir Khan told The Business Standard that the reclassification was based on court and regulatory findings.

"Meghna's electricity is consumed entirely within its own factories, and United supplies a few designated companies while retaining control over tariffs — characteristics of captive use," he said. "The rates have been applied correctly, and they are obligated to pay the outstanding amounts."

He added that gas supply to United's Dhaka EPZ plant was temporarily suspended in April but restored after partial payment.

Meghna Group's Everest Power, established in 2010 with a capacity of 25MW and later expanded to 50MW, primarily supplies electricity to industries in its Meghna Economic Zone. It occasionally sells surplus power to the Rural Electrification Board.

Reclassification and dispute

During the previous Awami League administration, Meghna's Everest Power and United's two plants were classified as IPPs in 2018 and billed accordingly. The interim government later reviewed that decision, concluding that under the Gas Act 2010 and rulings by the Bangladesh Energy Regulatory Commission (BERC) and the courts, the plants should be categorised as captive.

Energy officials said Titas Gas and Karnaphuli Gas Distribution Company are now recalculating gas supplied to the three plants at captive rates. Both companies, however, continue paying at IPP rates, widening the arrears.

United Group paid Tk50 crore in May, while Meghna Group has yet to pay Tk300 crore ordered by the court, which was due on 10 October.

United Power operates two plants—an 86MW facility in Dhaka EPZ and a 72MW one in Chattogram EPZ. About 70% of their output serves EPZ factories, 10% goes to the national grid, and the rest to private customers

Meghna's position

Meghna Group's Everest Power, established in 2010 with a capacity of 25MW and later expanded to 50MW, primarily supplies electricity to industries in its Meghna Economic Zone. It occasionally sells surplus power to the Rural Electrification Board.

Chairman and Managing Director Mostafa Kamal said the issue is now before the court, with the next hearing scheduled for 26 October.

"I met with the adviser. Under the Power Act 2008 and Gas Act 2010, power supplied to BEPZA is treated as IPP. Since the matter is sub judice, I prefer not to comment further," he told TBS.

According to BERC, Everest Power obtained its operating licence at the time of establishment but never applied for renewal. During the previous administration, disputes arose over its billing classification. The court ruled that electricity supplied to the grid should be billed at IPP gas rates, while the remainder would fall under captive tariffs.

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United's position

United Power operates two plants—an 86MW facility in Dhaka EPZ and a 72MW one in Chattogram EPZ. About 70% of their output serves EPZ factories, 10% goes to the national grid, and the rest to private customers.

United officials argue that their operations are commercial, not self-serving, and fully licensed by BERC and BEPZA.

"The issue first emerged in 2018. We went to court in 2019, but it declined to intervene," said Rahat Bin Kamal, Head of New Business and GM (Power Division) at United Enterprises, in a written response. "In 2023, the Energy Division confirmed that gas used for supplying power to BEPZA falls under the 'power' customer category. We cleared all dues up to August under that arrangement. The government has now reopened an old dispute."

The company said it had repeatedly written to the Energy Division, BERC, Titas, Karnaphuli, and BEPZA but received no response. It warned that applying captive gas rates would cause severe financial strain and potentially force shutdowns.

A BEPZA official, speaking on condition of anonymity, said the authority is not a party to the classification decision.

"BEPZA's agreement with United only requires uninterrupted power at approved rates. We simply add a 10% service fee to United's rate," the official said.

Expert view

Company law expert Ahsanul Karim told TBS that government policy should remain consistent. 

"The government entered into agreements with United based on policies in 2018 or 2023. While governments may change, any benefits granted cannot be abruptly withdrawn. Even if a law is repealed, actions taken under previous law remain valid," he said.

He added: "In special circumstances, the government can cancel an agreement, but it must first issue legal notices or show-cause orders and consider the parties' responses before deciding."