Energy Subsidies in Bangladesh
The GSI’s program of work in Bangladesh undertakes research and policy engagement on subsidies for fuel consumers and renewable energy, with the intention of contributing to the following policy objectives:
- Reduce overall fossil fuel subsidy expenditure
- Improve the fair social distribution of subsidy expenditure
- Ensuring that subsidy reforms are gender sensitive and promote gender equality
- Increase clean energy access and use, particularly among poorer households
In carrying forward this work, the Global Subsidies Initiative has collaborated primarily with the Bangladesh Institute of Development Studies (BIDS).
The Government of Bangladesh has committed to ensuring access to affordable and reliable electricity for all citizens by 2021. At present, however, only about half of the population has access to electricity, while supply is hardly reliable for those with access. To improve the situation, the government has adopted a comprehensive energy development strategy to explore supply-side options along with demand management that conserves energy and discourages inefficient use. This report addresses the key priority issues for reform in the energy sector along with an agenda for its progressive implementation. It starts with an overview of energy subsidies in Bangladesh, before surveying the country’s energy sector development plans, with an emphasis on the electricity sector. Finally, the report discusses the important role that energy pricing policy will play in achieving the government’s objectives.
The Government faces an urgent need to address energy subsidies as the costs continue to escalate due to volatile international oil prices and skyrocketing demand for imported oil to help address Bangladesh’s power crisis. For FY2013 – the Government has budgeted BDT 155 billion (US $1.9 billion) for the direct, on-budget energy subsidies alone. With the FY2013 energy subsidy bill estimated to be six times more than 2010 expenditure, it is becoming increasingly difficult for the government to sustain current energy subsidies with its limited fiscal resources. This report provides detailed analysis deriving new estimates of the full cost of Bangladesh’s energy subsidies and maps the stakeholders, particularly low-income groups, most likely to be affected by reforms.
Energy subsidies receive a large share of government expenditure in Bangladesh. Bangladesh started subsidizing the retail prices of energy products following independence in 1971. Today, with soaring global prices and rapidly rising demand for fuels, these subsidies take a heavy toll on government finances. This guide is intended to help citizens understand energy subsidies in Bangladesh. The guide discusses the size of subsidies to different energy types, the segments of society that benefit the most, and how they affect the country’s economy and environment. It also highlights the process of reforming energy subsidies, drawing on the experience of Bangladesh and other developing countries.