Rural consumers may bear brunt as BPDB seeks slab overhaul to cut subsidies

A proposed overhaul of the residential electricity tariff structure could increase costs for rural consumers using between 51 and 200 kilowatt-hours (KWH) of electricity a month.

At the centre of the proposal is a plan by the Bangladesh Power Development Board (BPDB) to abolish the existing 76-200KWH slab and replace it with a broader 0-200KWH slab following the lifeline category of 0-50KWH.

An analysis of the proposal shows that consumers crossing the 50KWH lifeline threshold would face a sharp rise in electricity costs even without any new tariff increase.

Under the current tariff structure, residential users consuming between 51KWH and 75KWH pay Tk0.63 more per unit than lifeline consumers, whose rate stands at Tk4.63 per KWH. Consumers using between 76KWH and 200KWH currently pay an additional Tk1.94 per unit over the first slab tariff.

However, under the proposed structure, all consumers exceeding 50KWH and remaining within 200KWH would have to pay an additional Tk2.57 per unit.

Officials at the Bangladesh Energy Regulatory Commission (Berc) and BPDB said the removal of the 76-200KWH slab would significantly raise electricity costs for low-volume consumers, particularly in rural areas where most households consume less than 200KWH a month.

According to the BPDB proposal submitted to Berc, replacing the existing 76-200 unit slab with a unified 0-200 unit slab could reduce government subsidy requirements by Tk2,845.66 crore in the 2026-27 fiscal year.

The proposal followed a meeting of a six-member high-level cabinet committee held at the Finance Division on 27 April and chaired by Finance Minister Amir Khosru Mahmud Chowdhury. 

The committee also included the advisers for power and commerce, along with senior officials from the Finance Division, Power Division, and Energy and Mineral Resources Division.

Rural consumers dominate lower slabs

Under the LT-A residential tariff category, there are currently seven consumption slabs, including the lifeline category for users consuming up to 50KWH.

BPDB data show that apart from lifeline consumers, around 4.80 lakh users fall within the 0-75KWH slab, while 18.20 lakh consumers use between 76KWH and 200KWH a month.

Another 4 lakh consumers fall within the 201-300KWH slab, while 1.49 lakh users consume between 301KWH and 400KWH. Around 87,000 consumers use between 401KWH and 600KWH, while approximately 34,000 consume more than 600KWH.

Together, the first and second slabs account for more than 23 lakh consumers, representing about 60.07% of the 38.30 lakh residential subscribers under LT-A category.

In its observations, the cabinet committee argued that the slab restructuring would "provide protection to poor customers, motivate salaried middle-class customers to save electricity and reduce subsidies given to wealthy consumers."

However, energy regulators and sector insiders expressed concern that the opposite effect could occur.

Berc Chairman Jalal Ahmed told The Business Standard that the proposal would ultimately increase the burden on low-volume users.

"We will give protection to the low-volume users and concentrate on reducing waste, fraud and abuse in the distribution companies," he said.

Explaining the impact of the proposed change, he said: "If consumers use between 51KWH and 75KWH, under the existing tariff structure, the per-unit cost increases by Tk0.63. But in the proposed structure, it would jump by Tk2.57."

BPDB has also separately proposed increasing retail electricity tariffs by between Tk1.29 and Tk1.61 per unit from the current rates.

REB consumers account for most subsidy burden

According to the BPDB proposal, around 63% of the utility's revenue shortfall in FY-25, amounting to Tk379,740.89 million, was linked to consumers under REB.

BPDB said REB consumers accounted for 56.16% of total electricity consumption during the fiscal year.

Due to the large consumer base in REB-served areas, BPDB projected that the revenue shortfall could rise to Tk399,443.02 million, or 63.44% of the total, in FY26 and Tk418,589.35 million, or 63.85%, in FY27.

BPDB officials, speaking on condition of anonymity, said most subsidies are currently directed towards REB consumers, more than 60% of whom consume below 200KWH a month.

They added that eliminating the 76-200KWH slab could generate nearly Tk3,000 crore in additional revenue annually.