Not all additional costs are subsidies or losses

First, consider the case of the Bangladesh Petroleum Corporation (BPC). Recently, much of the extra expenditure has been interpreted by many as a loss or subsidy. In reality, this is not entirely the case. BPC has consistently earned profits over the past few years. In the last fiscal year alone, the corporation made a profit of 4,300 crore taka. Therefore, the current shortfall is not an entirely new burden for BPC.

The corporation has the capacity to cover these costs from its past earnings. These are BPC’s accumulated revenues, which were primarily collected from consumers in advance. Due to flaws in the fuel pricing structure, consumers have paid an additional 15-22 percent in fuel costs, which has helped increase BPC’s profits.

\A similar picture is seen in other energy companies, including RPGL (Rupantarita Prakritik Gas Company Limited). Although their profits are comparatively lower, they are not entirely operating at a loss. Therefore, interpreting all expenditures in the energy sector directly as subsidies is not fully consistent with reality.

The situation in the power sector is somewhat different. It is said that nearly 20,000 crore taka in subsidies is needed for this sector. However, this is not a new crisis; it is the result of long-standing structural problems. The electricity sector has been consistently operating at a loss over the past few years.

Capacity charges, high-priced power purchase agreements, and uncontrolled expenses have increased the financial burden. Reducing subsidies does not necessarily mean raising electricity prices. Rather, it is essential to reform the pricing structure and reduce unnecessary expenses. With proper pricing, significant savings can be achieved without placing extra pressure on consumers.

Another important issue is the dollar shortage. Even if fuel prices are raised and more money is collected from consumers, it will not directly help increase fuel imports, because consumers pay in local currency, not dollars. Fuel imports require dollars. In this situation, the government’s most important task is to create long-term alternatives. For example, reducing diesel use in agricultural irrigation and introducing solar-powered irrigation systems could save a substantial amount of dollars annually. Similarly, increasing the use of electric vehicles in the transport sector would reduce dependence on imported fuel. Rapid exploration and production from new gas fields could ease pressure on LNG and save foreign currency.

The current situation is part of a global energy crisis, which affects the entire economy -- industry, agriculture, transport, and electricity generation alike. In this reality, the government should focus not only on managing short-term crises but also on implementing long-term reforms. The current energy crisis cannot be viewed solely as a question of subsidies or price increases. Through proper pricing, reducing unnecessary expenses, investing in renewable energy, and implementing transparent policies, this crisis can be effectively addressed.

* Khondaker Golam Moazzem is Research Director, Center for Policy Dialogue (CPD)