The power generation sector has been incurring losses year after year. Every year, government subsidies for this sector increase, with a record Tk 620 billion (62,000 crore) subsidy provided in the last fiscal year. Yet, state-owned power generation companies continue to make regular profits.
The government calls this “artificial profit”. To stop it, the Power Division issued a directive last September. However, company officials and employees still shared profits among themselves.
As per the contracts, the Bangladesh Power Development Board (BPDB) purchases electricity generated from all state-owned and private power plants. BPDB then sells it to six distribution companies at rates set by the Bangladesh Energy Regulatory Commission (BERC).
On average, BPDB spends over Tk 11 per unit of electricity purchased but sells it at Tk 7.04 per unit, resulting in losses that are reimbursed by the government as subsidies.
There are six state-owned companies in power generation, six in distribution, and one in transmission. Their salary structures are significantly higher than the government pay scale. Officials and employees receive benefits including provident fund, gratuity, annual leave, group insurance, and annual salary increments. On top of that, they share company profits every year as a “profit bonus”.
Industry insiders say the profits of these power plants do not depend on workforce efficiency or electricity generation. A plant can make profits for the whole year even without producing electricity.
PDB pays a fixed capacity charge to the plant under power purchase agreements, whether or not electricity is generated. Hence, there is no logical basis for such “profit bonuses”.
Although registered under company law, these companies are direct or indirect beneficiaries of government subsidies. Without these subsidies, they would never be profitable.
Showing them as profitable and distributing profits is therefore unrealistic. Profit and loss calculations should consider government subsidies.
According to labour law, 5 per cent of company profits are deposited into the Workers’ Profit Participation Fund (WPPF). Of this, 80 per cent goes to the participation fund, and 10 per cent each to the welfare fund and the Workers’ Welfare Foundation. Two-thirds of the participation fund is shared equally among officers and employees each year, while the rest goes to their retirement fund.
Labour law mandates profit sharing within nine months of the previous fiscal year. As a result, each officer and employee receives several lakh taka annually.
Profit sharing
To cover cost deficits, successive governments have raised electricity prices 12 times at the wholesale level and 14 times at the retail level over the past one and a half decades. Yet, subsidies have continued to rise.
In the last fiscal year, Tk 620 billion (62,000 crore) was provided as subsidies, mainly to offset high costs in electricity generation.
There are six state-owned companies in power generation. Although PDB incurs losses when buying electricity, these companies make profits every year.
On 12 September of last year, the Adviser to the Ministry of Power, Energy, and Mineral Resources directed all state-owned companies in the power sector to suspend profit-sharing until further review. Following this directive, on September 24, the Power Division sent a letter to all companies instructing them to comply with the Adviser's directive.
On 16 April, the Power Division held a meeting regarding profit sharing in power companies. Following the meeting, a letter to BPDB stated that state-owned power companies were showing artificial profits because government subsidies were not accounted for as part of their costs. The letter instructed companies to calculate income and expenditure according to a prescribed formula and comply with the directive.
However, at the end of March, the state-owned Electricity Generation Company of Bangladesh Limited (EGCB) distributed profits for the 2023-24 fiscal year. Gradually, four other state-owned companies—Ashuganj Power Station Company Limited (APSCL), North-West Power Generation Company Limited (NWPGCL), Rural Power Company Limited (RPCL), and B-R Powergen Limited (BRPL)—distributed profits within May for the same fiscal year.
The remaining company, Coal Power Generation Company Bangladesh Limited (CPGCBL), has not yet declared profits due to ongoing power purchase agreement processes.
According to annual reports, from 2017-18 to 2023-24, NWPGCL deposited Tk 2.18 billion (218.33 crore) into WPPF, of which around Tk 370 million (37 crore) was distributed as profit in 2023-24. EGCB distributed Tk 178 million (16.77 crore), down from Tk 174 million (17.37 crore) the previous year. APSCL distributed Tk 268 million (26.81 crore), up from Tk 137 million (13.77 crore). RPCL distributed nearly Tk 10 million (9.84 crore), up from Tk 23 million (2.27 crore). BRPL distributed Tk 56 million (5.62 crore), up from nearly Tk 21 million (2.09 crore).
Responsible officials of power generation companies said that profit sharing is a legal obligation under labour law. To avoid legal issues, they held verbal discussions with the Power Division and distributed profits for 2023-24.
Pressure on joint venture companies
The Payra Thermal Power Plant, launched at the end of 2019-20, produced electricity for just two months. Profit sharing was done for that fiscal year. Since then, profit distribution has been suspended for the joint venture Bangladesh China Power Company Limited (BCPCL).
However, officials and employees are pressuring for profit sharing. The Chinese partner, CMC, holding 50 per cent ownership, has formally objected, stating that the plant was built with Exim Bank of China financing, to be repaid over 11.5 years. No profit distribution can be allowed before loan repayment.
BCPCL sources said the company made around Tk 1.27 billion (127 crore) profit in 2019-20, with Tk 63.5 million (6.35 crore) going to WPPF. Profits have increased yearly, and with WPPF contributions, around Tk 2.11 billion (211 crore) would be due for 2020-21 to 2023-24. Total profits over four years reached Tk 42.16 billion (4,216 crore). After the government change in August 2024, BCPCL filed a petition in the High Court to stop profit distribution. Fifty-five employees appealed to maintain profit sharing, and the case is pending at the court.
The Bangladesh-India Friendship Power Company Limited (BIFPCL), the joint venture company that owns the Rampal Power Plant in Bagerhat, has sought opinions from its two partners regarding the distribution of profits. In a letter sent to BIFPCL on 17 July, the Bangladesh Power Development Board (BPDB), which holds the Bangladeshi stake, stated that profit distribution should be suspended in accordance with government directives.
Muhammad Fouzul Kabir Khan, Adviser to the Ministry of Power, Energy and Mineral Resources, told Prothom Alo that accounts for 2023-24 were already finalised, so WPPF profit distribution was made. After that, no further distribution will occur, and profit sharing will remain completely stopped.
‘Loot in the name of profit’
Power sector experts say that state-owned companies are neither for profit nor loss—they exist to serve. Yet, they make profits and share them using labour law provisions. Salaries in power companies are 1.5 times the government pay scale. Officers and employees take billion of taka in the name of profit, with the cost borne by the public.
Similarly, gas sector companies take profits within subsidies. Experts argue that the government should amend laws if necessary, and remove WPPF provisions in state-owned companies.
M Shamsul Alam, Energy Adviser of the Consumers Association of Bangladesh (CAB), told Prothom Alo, “They (the company’s employees) are not labourers; they are government employees. Yet they claim a share of the profits by citing labour laws. This is lawlessness. And if the company is sharing profits, then it should also bear the losses. So why are subsidies being provided? How can profit-sharing happen while the company is running at a continuous loss with massive subsidies? This is looting in the name of profit. There is no precedent anywhere in the world for profit-sharing in the midst of losses.”