Govt to renegotiate Hasina-era power deals, cites fiscal stress
Officials say the manner in which several contracts were awarded amounted to sacrificing the country’s interest, leaving the sector burdened with high costs and rigid obligations
Bangladesh government is taking initiative to renegotiate all power deals signed during the tenure of ousted prime minister Sheikh Hasina, as policymakers believe many of those agreements compromised national interest.
Officials say the manner in which several contracts were awarded amounted to sacrificing the country's interest, leaving the sector burdened with high costs and rigid obligations.
Speaking to reporters at the Secretariat on Tuesday (24 February) Power, Energy and Mineral Resources Minister Iqbal Hasan Mahmud Tuku said, "Electricity and sovereignty are the same thing. We gave this sovereignty to some people (power producers). We need to establish our sovereignty over the deals."
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"Electricity and sovereignty are the same thing. We gave this sovereignty to some people (power producers). We need to establish our sovereignty over the deals"
By "bringing sovereignty back," the minister meant ensuring fair terms through renegotiation of power purchase agreements (PPAs) signed during the previous regime – deals that the National Review Committee (NRC) on power contracts and sector insiders have described as one-sided.
In its recently released report, the NRC said a number of agreements were shaped by cronyism and kleptocracy rather than competitive and transparent processes.
However, Tuku acknowledged that any unilateral move could trigger legal disputes, particularly in international arbitration forums such as the Singapore International Arbitration Centre.
"We need to review all the anti-national deals in the power sector to find a solution. We will sit with them and discuss," he said, signalling a preference for negotiation over confrontation.
The Bangladesh Independent Power Producers' Association (BIPPA) also welcomed the move.
Speaking to The Business Standard on 24 February, BIPPA President David Hasanat said, "We welcome the move to renegotiate the power deals. BIPPA will cooperate with the government in resolving the persistent crisis in the power sector."
He acknowledged that some contracts appeared inequitable.
"There are deals that are unfair — nobody can deny that. Why should a power plant with the same specifications receive a higher tariff while another gets less? These discrepancies must be addressed," he added.
Energy expert M Tamim also supported the idea of resolving disputes through dialogue. "If it is done through negotiation and mutual agreement, I don't see anything wrong. Most of these projects are already mature," he told TBS.
Sector insiders have long argued that the average generation cost of oil-fired plants remained significantly higher than fuel costs alone would justify — pointing to substantial fixed costs in the form of capacity payments.
Similarly, gas-fired plants operating at low plant factors have produced comparatively expensive electricity, again indicating heavy fixed charges.
As reserve margins increased over the past several years, capacity payments rose in tandem, intensifying fiscal pressure.
Referring to the sovereign guarantees extended to producers, Tuku said, "There are many bad deals in the power sector. Those deals were safeguarded by sovereign guarantees. We can't do anything whimsically."
He stressed that resolving the sector's challenges through discussions across the table would be more prudent than engaging in protracted legal battles.
Describing the current state of the power and energy sector as deeply challenging, the minister said, "At the moment, the entire sector is facing difficulties. Financial crisis, irregularities and corruption have created massive challenges."
"Electricity and sovereignty are closely intertwined. We gave this sovereignty to some people (power producers). I want to bring this sovereignty back to the people of the country. That is my driving force," he added.
The NRC report noted that long-term PPAs executed under the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act remain binding and continue to shape fiscal and pricing outcomes.
"Without active reform, Bangladesh risks substituting one form of rigidity for another – discretionary governance replaced by inflexible contracts. Fiscal stress will persist, and opportunities for correction will narrow over time as obligations accumulate," the report said.
It warned that policymakers face difficult trade-offs.
"Aggressive unilateral action risks legal disputes, investor uncertainty and short-term disruption."
At the same time, the committee cautioned that inaction would "guarantee continued fiscal drain, erosion of competitiveness and foregone development opportunities."
Highlighting immediate priorities, Tuku said maintaining stable electricity supply during Ramadan, the upcoming summer and the irrigation season is on the top of the agenda.
"After taking charge, our main focus is to maintain normal power supply during Ramadan, summer and irrigation season. We are preparing plans for this purpose. They will be announced soon," he said.
Outlining his longer-term vision, the minister signalled a shift toward cleaner energy. "Our future push in the power sector will be green. We will prioritise renewable energy," he said.
When asked about outstanding power bills and subsidy pressures, Tuku said, "There was no fuss about reducing subsidies during the Awami League government for so many years. We are only a six-day-old government — how can we make a decision on this now?"
On the financial health of the ministry, he was candid, "My ministry is already drowning in huge debt. This mountain of dues was not created in a day. Tell me what they did during Hasina's long tenure. Efforts are underway to settle the outstanding payments to power companies."
