The finance ministry has declined a request from the Power Division to convert Bangladesh Power Development Board’s (BPDB) outstanding Tk566 billion loan into a subsidy, citing growing fiscal pressures, officials confirmed.

The loan, disbursed between July 2006 and November 2017 to cover BPDB’s operational losses, now stands at Tk565.99 billion, including Tk134.39 billion in accrued interest.

The principal amount of Tk431.60 billion was lent to offset losses incurred from purchasing electricity from rental, quick rental, and independent power producers (IPPs) at rates higher than the retail price.

BPDB has consistently operated at a loss by selling electricity below cost, a gap traditionally covered through both loans and direct subsidies. A finance ministry official said, “We have declined the Power Division’s request to convert BPDB’s loan into a subsidy, as the public fund is already strained.”

For FY2025-26, the government has earmarked Tk370 billion in electricity subsidies. The revised subsidy allocation for FY2024- 25 stands at Tk620 billion.

Power Division officials argue that converting the loans into subsidies is justified since they did not fund capital projects but were instead used to bridge operational shortfalls. They maintain that the change is crucial to improving BPDB’s financial health, meeting donor expectations, and ensuring transparency in audit reporting.

However, the finance ministry warned that granting such relief could set a precedent for other state-owned entities to demand similar concessions.