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The report identified LNG as a major source of fiscal stress, with March spot shipments procured at $19.77-$28.28 per MMBtu, far above historical averages.

These purchases required subsidies of about Tk 67.50 per cubic metre, excluding terminal costs, the report said. The cost of per cubic metre of imported LNG was Tk 91.3 that month, whereas the average domestic gas price was Tk 23.82.

If imports during April-June match last year’s 74.7 million MMBtu, the subsidy burden could swell dramatically.

While the IEEFA report projected LNG import subsidy in April-June at Tk 13,134 crore, Petrobangla estimated Tk 11,996 crore will be required during the quarter.

The estimated quarterly subsidy for LNG has far exceeded the annual target. The government has allocated Tk 9,000 crore for entire FY2025‑26.

The government plans to import 30 LNG shipments in this quarter, including at least 24 from the spot market at an average $19 per MMBtu.

Officials at the power and energy ministry said they are assessing the evolving market situation.

“We are monitoring the developments closely and evaluating available options to minimise pressure on consumers,” a Petrobangla official told The Daily Star on condition of anonymity.

Attempts to reach Petrobangla Chairman Md Arfanul Hoque were unsuccessful.

Prof M Shamsul Alam, energy adviser to the Consumers Association of Bangladesh, warned that rising LNG import costs could trigger another round of gas tariff hikes. “Gas prices will certainly be increased. The current trend clearly points in that direction.”

He questioned the rationale of importing LNG at such high prices.

“Despite importing expensive LNG, there is no meaningful improvement in electricity supply. Then what is the justification for this additional expenditure?”

He criticised repeated failures to accelerate domestic gas exploration, citing reserves such as Chattak East that remain untapped. “The previous Awami League government said it would increase domestic gas exploration. The caretaker administration said the same thing. The current government is also saying it. But where are the results?”

Consumers, he noted, have long contributed around Tk 1,500 crore annually to energy development funds intended to boost domestic production and shield against global volatility. “These funds were created so that when international prices rise, consumers would receive temporary protection. But none of that has happened. Instead, our market has become increasingly tied to volatile import dependence.”

POWER UNDER PRESSURE

Coal and oil prices have also spiked amid fears of prolonged international instability.

This is likely to further raise Bangladesh’s electricity generation costs, as imported coal fuels most large plants and expensive furnace oil continues to play a major role during peak demand.

But analysts argue that Bangladesh’s own power sector inefficiencies are magnifying the impact of every external shock. The country currently maintains far more generation capacity than required. Its reserve margin reached 61.3 percent in FY2024-25, meaning a large portion of installed power plants remains underutilised while still receiving contractual capacity payments.

These payments continue regardless of electricity generated.

According to the IEEFA analysis, private oil-fired plants received average capacity payments of around Tk 9.5 per kilowatt-hour (kWh), while private coal-fired plants received around Tk 5.9 per kWh, significantly inflating average generation costs.

This overcapacity has contributed to a sharp rise in generation costs.

Bangladesh’s average grid-based electricity generation cost has climbed from Tk 6.61 per unit in FY2020-21 to Tk 12.1 in FY2024-25.

“Renewable energy contributes only 2.3 percent of Bangladesh’s total power generation, far below the global average of 33.8 percent, leaving the country heavily exposed to imported fuel volatility,” reads the IEEFA report.

The report recommended rapidly scaling up solar generation, reducing dependence on costly oil-fired plants and expanding regional hydropower imports to lower LNG demand.

It also urges policymakers to rationalise future power expansion plans and reduce reserve margins to contain subsidy costs.

Shafiqul Alam, IEEFA’s lead energy analyst for South Asia who conducted the study, noted that Bangladesh is under pressure from international lenders to reduce subsidy burdens under ongoing reform commitments.

“A prolonged spike in fuel import costs could complicate those efforts and force difficult policy decisions, including fresh tariff adjustments,” he told this newspaper.