Govt to clear gas, power dues in  FY25 with unspent ADP funds

The finance ministry has decided to clear all gas and electricity sector arrears within the current fiscal year by increasing the revised Annual Development Programme (ADP) outlay by reallocating unspent funds in the sector.

Finance Division officials said the ADP budget for FY25 is Tk2.78 lakh crore, with Tk50,000 crore spent in the first six months. As a result, they expect a large portion of the ADP to remain unspent by year-end, which will facilitate the full settlement of gas and electricity arrears.

A senior Finance Division official, speaking on condition of anonymity, told The Business Standard, "All gas and electricity arrears will be paid within the current fiscal year, with necessary allocations made in the revised budget."

The official added that reduced expenditure across various sectors, including the ADP, would allow unspent funds to be redirected towards clearing the gas and electricity subsidy arrears, with hopes that no further arrears will persist in the next fiscal year.

Power and Energy Adviser Muhammad Fouzul Kabir Khan and Shipping Adviser Brig Gen (retd) M Sakhawat Hossain met with Finance Adviser Salehuddin Ahmed on Monday to discuss settling electricity sector arrears.

The Bangladesh Bank has agreed to provide dollars from foreign exchange reserves to pay the arrears from March, according to officials concerned.

The power sector has been burdened with substantial arrears for the past three fiscal years, placing financial strain on private power companies and restricting their access to bank loans due to delayed government payments.

Meanwhile, the Adani Group continues to press for outstanding dues on electricity imports from India.

Unpaid electricity subsidies have left power companies unable to pay Petrobangla for fuel, causing Petrobangla to hesitate in continuing supply. In response, the finance ministry aims to settle all gas and electricity arrears within the current fiscal year.

The finance ministry's outstanding electricity subsidy stands at approximately Tk38,000 crore, while Petrobangla's gas subsidy dues total around Tk7,000 crore. With the upcoming summer season, electricity sector subsidies are expected to rise by Tk4,000 crore per month.

The current fiscal year's budget allocated Tk35,000 crore for electricity subsidies, of which Tk20,000 crore has already been disbursed. Finance officials estimate that an additional Tk30,000 crore may be allocated in the revised budget to clear electricity dues.

The previous Awami League government issued bonds to clear electricity arrears and planned to reduce subsidies by raising prices quarterly. While the interim government opted not to increase electricity prices, it initiated bond issuance to settle Tk5,000 crore in arrears owed to independent power producers.

However, due to low interest rates, banks have shown reluctance to invest in these special bonds, while the IMF has advised against bond issuance for subsidy payments. Consequently, the finance ministry has withdrawn its plan to issue bonds.

During the current winter season, electricity demand stands between 11,000MW and 12,000MW. However, it is expected to rise to 18,000MW during the summer and irrigation period.

Due to the ongoing dollar and financial crisis, disruptions in the import of coal, furnace oil, and gas led to the closure of several power plants, including Payra and Rampal, during last year's summer season, resulting in increased load shedding.