Cheap energy, not cheap labour, can make Bangladesh a manufacturing hub

Bangladesh cannot become a manufacturing powerhouse while relying on imported liquid fuels and LNG with high, volatile prices and uncertain supplies.

Low wages cannot offset idle machinery, wasted materials and missed delivery deadlines.

Affordable, reliable energy must be at the heart of the country’s industrial policy.

The government recognises the problem. In August 2026, Power Minister Iqbal Hassan Mahmood acknowledged that substantial generation capacity could not be fully utilised because of inadequate fuel.

Bangladesh’s immediate challenge is securing affordable electricity from the cheapest possibly sources-including direct imports from India, solar and nuclear-not necessarily running the most expensive domestic liquid fuel plants.

Inexpensive labour cannot remain an unlimited competitive advantage. Bangladesh received $35.59 billion in remittances in FY2025-26, up 17.4 percent from $30.33 billion.

Overseas employment expands workers’ options and supports household incomes.

The government’s 110 training institutions offering courses in 55 trades, alongside efforts to overcome language barriers, should help migrants earn more through English proficiency, destination-country languages and vocational qualifications.

However, this migration also impacts domestic recruitment. World Bank research found higher rural wages and demand for seasonal agricultural workers in migration-intensive areas.

Overseas opportunities and remittance income can make farm labour, domestic help and factory workers harder to recruit at previously prevailing wages.

These effects vary: Bangladesh still faces underemployment and falling real wages. Industry’s sustainable response is higher productivity through skills, efficient machinery and reliable power.

The electricity arithmetic shows why that response is urgent. From June 2026, BERC raised the weighted-average bulk tariff to Tk8.39/kWh, an announced increase of 19.85 percent. Yet annual power subsidies were still expected to approach Tk41,000 crore.

For historical context, BPDB’s FY2024-25 average bulk supply cost was Tk12.34, against realised bulk revenue of Tk6.80 per unit.

Those earlier figures should not be confused with today’s tariff or subsidy gap.
Fuel-price volatility is the fundamental exposure.

Electricity tariffs change periodically; international fuel prices and exchange rates can move daily. Bangladesh buys fuel in dollars and sells electricity in taka.

Illustratively, a 30 percent increase in a fuel’s dollar price, combined with a 10 percent increase in the taka cost of a dollar, raises its taka cost by 43 percent. Subsidies, arrears, borrowing or consumers must absorb the difference.

Bangladesh cannot control the forces behind these movements. OPEC+ production decisions influence supply, while hedge funds and other financial investors trade expectations through futures markets.

Speculative positioning can contribute to rapid repricing, although physical supply, demand and inventories remain fundamental.

The IEA recorded a fall of more than $40 a barrel to around $82 in North Sea Dated crude between May and mid-June 2026. But now crude is trading above $100!!

Heavy fuel oil is particularly damaging to competitiveness. IEEFA estimated furnace-oil generation costs of Tk27.50/kWh in FY2024-25, compared with Bangladesh’s reported average procurement cost of Tk14.86/kWh from Adani’s Godda plant during the same year.

HFO cost approximately 85 percent more. Godda itself was expensive against the Tk9.33 weighted average for three other Indian suppliers. Every contract deserves scrutiny, but routinely generating electricity at around Tk27 per unit imposes an exceptional burden.

These are annual average costs, not fuel-only charges or immediate switching savings.
Imported fuel introduces US sanction risks as well.

Benchmark-linked prices need not equal suppliers’ acquisition costs. BPC’s published 2024 furnace-oil tender, for example, uses five Platts publication days around the bill-of-lading date, adjusted by a contractual premium or discount.

If an unscrupulous businessmen or trader for example get caught trying to take advantage of this pricing mechanism by importing cheap Russian and Iranian crude and charging government Singapore Platts the entire nation can get sanctioned.

LNG offers no immunity either. Reported spot purchases rose from $10.37/MMBtu in January 2026 to $28.28 in March, following disruption of contracted supplies-a 173 percent increase.

Applied to an identical 3.36 million MMBtu cargo, those prices imply a jump from $34.8 million to $95 million, or $60.2 million extra.

This illustrative comparison captures how quickly a distant conflict becomes a domestic financing emergency.

Long-term contracts reduce some risks but cannot guarantee physical delivery. In July, Petrobangla told S&P Global that approximately 20 of 40 planned QatarEnergy cargoes could be affected in 2026.

In August, rough weather prevented unloading at Summit’s terminal while a technical fault restricted Excelerate’s terminal to approximately half capacity. Contractual commitments cannot reopen shipping routes or repair terminals.

Other countries demonstrate that oil dependence can fall sharply. Pakistan’s power-sector petroleum consumption declined 77.68 percent, from 520,700 tonnes to 116,210 tonnes, between July-March FY2024 and the corresponding FY2025 period.

Its government attributed the decline to hydro, nuclear, coal and LNG displacing furnace oil; hydro, nuclear and renewables supplied 53.7 percent of reported generation.

This was broader diversification, not a solar-only achievement. Pakistan’s PKR2.39 trillion power-sector circular debt at June 2024 also shows why fuel reform must accompany financial discipline.

China built its industrial electricity base principally around coal and hydro while reducing oil’s role from the 1980s.

Coal supplied 82 percent of generation in 1997; by 2024, its share was almost 60 percent, with renewables supplying approximately 35 percent.

Bangladesh should learn from sustained investment in dependable domestic generation and grids while choosing cleaner technologies than those available during China’s early industrialisation.

India likewise developed without making oil its principal electricity source.

Diesel-based utility capacity fell from approximately 1,200MW in 2012 to 589MW in March 2025, just 0.12 percent of total utility capacity; this excludes much small-scale backup generation.

Solar capacity meanwhile grew from 2.82GW in 2014 to 105.65GW by March 2025. Industrial expansion need not depend on routine oil-fired power.

For Bangladesh, reducing fuel exposure is also a foreign-exchange priority.

External debt stood at $110.93 billion in March 2026, including $90.91 billion in public-sector debt; BPM6 reserves were $29.42 billion.

The debt is not all immediately payable, and infrastructure can support exports without collecting dollars directly. Nevertheless, foreign obligations require foreign currency.

Emergency fuel purchases compete with debt service and productive imports.

The IMF’s original $4.7 billion package in 2023 and the January 2026 assessment of moderate debt-distress risk with limited room for shocks underline the need for resilience.

They do not establish national insolvency. Migrants’ remittances and export earnings should increasingly finance assets that reduce future import requirements.

Solar offers an immediate opening. In FY2024-25, solar and wind supplied only 1.21 percent and 0.10 percent of BPDB’s reported electricity balance, against 10.73 percent from furnace oil.

IRENA’s global average cost for new utility-scale solar in 2025 was approximately 4.4 US cents/kWh.

Bangladesh’s delivered cost must also reflect local financing, land, networks and storage, but the opportunity warrants rapid, competitive procurement on factory roofs, warehouses and suitable land.

An illustrative 10,000MW solar fleet at an assumed 18 percent capacity factor would generate 15.8 billion units annually, before storage and network losses.

Batteries can shift some output into evening demand: global utility-scale installation costs fell 93 percent between 2010 and 2024, to approximately $192/kWh of storage capacity.

A 1,000MW/4,000MWh system provides roughly four hours at rated output, so procurement must integrate generation, storage duration and grid requirements.

Nuclear can complement renewables with dependable low-carbon electricity and fuel inventories covering long periods.

Bangladesh should safely integrate Rooppur and evaluate expansion against full financing, construction, safety and waste-management costs.

Efficiency must advance simultaneously: SREDA targets a 20 percent reduction in primary-energy use per unit of GDP by 2030. Efficient motors, boilers, cooling and heat recovery lower production costs without suppressing wages.

Bangladesh needs a binding exit from imported liquid fuels in routine generation, timed to dependable replacement supply.

New LNG and imported-coal commitments should face rigorous comparisons with solar, storage, nuclear and efficiency under adverse price and exchange-rate scenarios.

Clean-energy equipment also requires imports, but well-chosen assets can replace recurring fuel purchases with years of productive service.

Cheap, reliable energy must become the foundation of competitiveness that low wages alone can no longer provide.