Reza Mahmud :
Despite a projected reduction in the overall budget for the fiscal year 2025-26, the government is expected to maintain a significant allocation for subsidies, with Tk 1,15,741 crore earmarked – nearly unchanged from the previous fiscal year.
In FY2024-25, the original subsidy allocation stood at Tk 1,15,000 crore but was later revised upwards to Tk 1,33,000 crore after the interim government cleared a substantial portion of outstanding dues across several sectors.
According to a draft prepared by the Ministry of Finance, the largest shares of the FY26 subsidy package will go to the power, fertiliser, and food sectors. Finance Adviser Dr Salehuddin Ahmed is scheduled to announce the national budget on 2 June.
Sources indicate that the total budget for FY26 will be approximately Tk 7,90,000 crore, as the interim administration aims to reduce the fiscal burden on the public by keeping the budget leaner.
Energy experts have cautiously welcomed the continuation of substantial subsidies, describing them as essential for safeguarding public welfare. Speaking to The New Nation, Professor Dr Ijaz Hossain emphasised the importance of addressing inefficiencies before allocating subsidies.
“The government must first address mismanagement and wastage of public funds in the energy sector. Strict measures are needed to reduce losses from capacity charges and system inefficiencies,” he stated.
Fellow energy expert Professor Badrul Imam echoed this sentiment, noting that energy affordability is critical for low-income households, farmers, and small industries. “For the welfare of the common people, especially those with lower incomes, maintaining reasonable energy subsidies is imperative,” he said.
The power sector is expected to receive the highest share of subsidies in FY26-around Tk 37,000 crore. This is slightly below the initial Tk 40,000 crore allocated for FY25 but significantly less than the revised figure of Tk 62,000 crore, which included the clearance of past arrears.
Power sector subsidies were just Tk 9,000 crore in FY2020-21, but have surged in recent years following the commissioning of numerous new power plants without decommissioning older units, resulting in underutilisation and high capacity payments. The global spike in fuel and LNG prices following the Ukraine war, along with the depreciation of the taka, has further driven up power generation costs.
While much of the backlog in dues has now been cleared, finance ministry officials warned that some liabilities may still carry into FY26. “If leftover arrears spill into the new fiscal year, the allocation may exceed Tk 37,000 crore,” said one official.
Professor Selim Raihan of Dhaka University called for a medium-term strategy to gradually reduce subsidies through enhanced efficiency, renegotiation of contracts, and a reduction in capacity charges. He also urged a review of decisions taken by the interim government over the past nine months.
Officials noted that the government has refrained from renewing contracts with older power plants, potentially easing future fiscal liabilities. Additionally, the anticipated full-scale operation of the Rooppur Nuclear Power Plant and the Matarbari coal-fired plant is expected to save around Tk 3,000 crore in subsidies in FY26.
Meanwhile, LNG import subsidies are projected to rise from Tk 6,000 crore in FY25 to Tk 9,000 crore in FY26. According to Petrobangla, the current gap between the purchase and sale price of LNG stands at Tk 17,676 per unit, with Tk 6,500 crore of that gap subsidised by the government. The power sector was allocated Tk 35,000 crore in subsidies for FY2023-24. Prior to FY2021-22, annual subsidies in the sector typically ranged between Tk 7,000 crore and Tk 9,000 crore.
