Bangladesh's energy insecurity is a policy failure, not a price problem. While global fuel prices, foreign exchange shortages, and capacity payments play a role, they often obscure a more critical issue: a significant portion of our vulnerability is self-inflicted through policy design. This becomes evident when viewed through the current geopolitical landscape. Bangladesh's heavy reliance on energy imports, with nearly 90% passing through the Strait of Hormuz, a fragile maritime chokepoint, poses a direct supply-side risk. Any disruption here could have severe consequences, including delayed deliveries, skyrocketing prices, depleted foreign exchange reserves, and immediate load shedding. Therefore, energy policy must prioritize resilience, flexibility, and cost minimization. Unfortunately, Bangladesh's current framework falls short of these goals.
The current tax structure on primary fuels is a significant contributor to the problem. Bangladesh imposes different tax rates on various fuels: approximately 26.5% on heavy fuel oil (HFO), around 2% on LNG, and about 5% on coal for imports by power generators. These taxes are levied at the import stage, long before electricity generation. This is a fundamental policy error, as primary energy is a strategic input, not a consumption good. Heavily and unevenly taxing it distorts fuel choice, inflates generation costs, and reduces the system's ability to respond during supply disruptions.
The distortion doesn't end at the port. Once fuels enter the system, the Bangladesh Power Development Board (BPDB) incurs additional downstream costs, including taxes, margins, and administration charges, which can reach up to 20% for HFO-based generation. This results in the same unit of energy being burdened multiple times before it reaches consumers as electricity. Consequently, higher electricity tariffs or larger subsidies, reduced industrial competitiveness, strain on foreign exchange reserves, and lower investor confidence are the likely outcomes. In a time of global supply route threats, this tax structure amplifies risk rather than mitigating it.
To address this, Bangladesh needs discipline and consistency. All primary fuels should be subject to a single, uniform tax rate, ideally zero, or a maximum of 5% if revenue considerations demand it. This approach would immediately lower delivered fuel costs, allow for fuel switching during crises without artificial penalties, improve transparency and predictability, and strengthen energy security. Globally competitive economies focus on taxing value creation, not inputs critical to national productivity.
Energy security is not solely about state control but also about diversification, efficiency, and risk distribution. State entities like the Bangladesh Petroleum Corporation (BPC) and Petrobangla's Rupantarita Prakritik Gas Company Limited (RPGCL) should be corporatized and partially or fully privatized to improve efficiency and revenue generation. This would transfer working capital pressure, logistics risk, and price exposure to capable private operators. The same principle applies to electricity and gas transmission and distribution, where private participation under regulation has consistently led to lower system losses, faster grid modernization, and better service reliability.
Bangladesh already relies on private markets for essential goods, and there's no compelling economic logic to maintain state monopolies in the most capital-intensive import and distribution sectors. When global chokepoints can close overnight, rigid systems fail first. Therefore, Bangladesh's energy policy must be designed to withstand disruption, treating primary energy as a security input, removing tax distortions that magnify shocks, allowing private capital and expertise to share risk, and building flexibility into fuel sourcing and system operations. Energy security is about adapting quickly and affordably when the world becomes unstable, not just about the amount of power a country can generate.
