Oil Imports at Risk as Payment Default Threatens Supply Chain

The issue of unpaid bills for electricity import from India, amounting to Tk 60 thousand crores as of the end of last January, has put significant strain on Bangladesh's finances. The government's efforts to address this challenge, including releasing subsidy funds and issuing special bonds, have been insufficient to cover the outstanding liabilities.

The closure of Bhola's 34.5 MW rental power plant three months ago due to mechanical failure has plunged the district into a prolonged period of darkness and load shedding. The West Zone Power Distribution Company (Ozopadico) has been struggling to meet the electricity demand through the national grid, leading to frequent power outages. This situation has exacerbated the impact of the current heatwave on the people of Bhola, making daily life unbearable.

The resumption of regasification by Summit LNG Terminal Co's floating storage and regasification unit (FSRU) has led to an increase in the country's overall gas supply from gas-fired power plants. After resolving a technical glitch following its overhaul in Singapore, Summit's FSRU has resumed regasification, contributing to improved gas supply in Bangladesh.

The Power Division is actively pursuing the implementation of 125 green energy projects in Bangladesh, aiming to meet 10% of the country's power needs from renewables by 2025. These projects are expected to have a combined generation capacity of 12,047 megawatts, exceeding the country's present demand in winter and accounting for 70% of summer consumption.

Of these projects, seven solar power plants will incorporate energy storage capabilities to provide electricity during evening peak hours. The Power Division has received numerous investment proposals, both domestic and foreign, totalling around 11,000-12,000 megawatts of renewable energy.

The decrease in fuel oil prices on the world market has led to Bangladesh Petroleum Corporation (BPC), a state-owned entity responsible for fuel oil import and marketing, returning to profitability. Based on the latest information, the Ministry of Finance projects that BPC will achieve a net profit of around Tk 4,000 crore by the end of the current fiscal year 2023-24. This stands in contrast to earlier projections during the budget formulation, which estimated a potential loss of over Tk 10,000 crore for BPC in the same period.

Bangladesh is currently meeting a portion of its electricity demand through imports from neighbouring India, accounting for 12% of the country's total electricity supply. In the last fiscal year (2022-23), the expenditure on electricity imports amounted to Tk 9,223 crore. However, projections from the Ministry of Finance suggest that this figure could increase significantly in the current fiscal year (2023-24), reaching approximately Tk 17,586 crore. This represents a potential increase of over Tk 8,363 crore, or more than 90%.