The countrys energy and power sector has been severely affected since November by the dollar crisis, which has prompted state-owned Petrobangla and Bangladesh Power Development Board (BPDB) to open L/Cs to import fuels or purchase electricity from Independent Power Producers (IPPs) locally.
Due to the dollar crisis, Petrobangla has failed to pay gas purchase bills to Chevron Bangladesh, the countys major natural gas supplier, for the last one year, amounting to around $230 million, officials said.
Chevron Bangladesh supplies about 60 percent of natural gas to the national grid, with total output of around 1,300 million cubic feet per day (mmcfd). Chevron has repeatedly requested Petrobangla to pay their bills for the last two years. Sometimes Petrobangla has paid some amount but the arrears are now equivalent to 12 months of gas bills.
Meanwhile, since July 2023, BPDB has not paid any bills to Adani Power for electricity purchases. However, Adani Groups total arrears have reached around $500 million, according to BPDB.
Along with Adanis debts, the government has about Tk 25,000 crore in outstanding subsidy bills owed to IPPs, according to the Bangladesh Independent Power Producers Association (BIPPA).
"In 2022-2023 the amount was Tk 42,893 crore, of which Tk 30,334 crore has been carried over to 2023-2024.
However, this has been added to by a fresh Tk 12,759 crore in arrears till October," BIPPA data showed.
Under this situation, the Finance Ministry plans to issue special bonds to settle bank liabilities accrued by IPPs, to facilitate power producers, Petrobangla and the Bangladesh Petroleum Corporation (BPC) in streamlining their balance sheets.
"The central bank will issue bonds on behalf of the government. To operationalize this initiative, the Finance Ministry has formally requested the Power Division for data on bank loans given to IPPs. We hope this will reduce the governments immediate financial deficit, and provide some relief to banks and IPPs," a senior Finance Ministry official said.
Imran Karim, former president of BIPPA, told media that only paying the banks debt will not be logical without paying full dues.
Without elaborating, former Finance Secretary Muslim Chowdhury said the special bonds will not improve bank health much.
Issuing bonds defers liability from the governments side, he explained. If bonds are not repaid, the debt passes to the next generation. If bond interest rates are not matched to bank cost of funds, banks will not profit much. "If the bond rate is low, bank costs will not be recovered," he added.
Commenting on the issue, Power Division Senior Secretary Habibur Rahman told journalists the move would reduce governments immediate deficit, providing relief to banks and IPPs.
Finance officials explained that if an IPP has Tk100 crore outstanding subsidy and equal bank liability, the government will issue bonds to pay the full amount to the bank, allowing the IPP to clear its debt without impacting the bank.
However, if the IPPs bank liability is Tk200 crore, the government will still issue bonds but only cover Tk100 crore (matching the subsidy) for the bank.
In cases where an IPP has a Tk100 crore subsidy entitlement but only Tk50 crore bank liability, the government will issue a Tk50 crore bond to the bank, with the remaining subsidy gradually settled through BPDB.
