Power sector under legal spotlight after court ruling
Staff Reporter :
# Contracts fuel fiscal burden
# Indemnity provisions under scrutiny
Finance Adviser Dr Salehuddin Ahmed has raised serious concerns over inconsistencies and irregularities in the power purchase agreements signed with Independent Power Producers (IPPs) during the tenure of the previous Awami League (AL) government.
Speaking to reporters on Tuesday following meetings of the Cabinet Committee on Government Purchase and the Cabinet Committee on Economic Affairs at the Secretariat, Dr Salehuddin confirmed that a comprehensive legal and financial review of all IPP contracts is now underway.
“There were numerous deviations in how these contracts were awarded and structured,” the adviser said. “Key provisions-particularly those related to capacity payments, fuel supply obligations, and legal immunities-have drawn questions regarding transparency, public interest, and long-term financial sustainability.”
He noted that many of the agreements involved foreign entities and carried terms that significantly benefited the private operators, often at the cost of public resources.
“We have approved a proposal today to engage legal experts to assist with the review process, which will proceed through consultation and due legal channels,” Dr Salehuddin stated.
Indemnity Provisions Under Scrutiny The review follows a recent High Court verdict that declared two major clauses of the Power and Energy Fast Supply Enhancement (Special Provision) Act-widely known as the “Indemnity Act”-unconstitutional.
The Act, introduced and repeatedly extended by the AL administration, had offered blanket protection to officials and policymakers involved in the approval of power sector projects.
It allowed the awarding of multi-billion-dollar contracts-often without competitive bidding or feasibility studies-while shielding such decisions from legal or parliamentary scrutiny.
Although the court allowed previously approved contracts to stand “in good faith” to prevent immediate disruptions, it made clear that such indemnity cannot continue. The ruling has renewed calls for greater transparency in Bangladesh’s power sector governance.
Dr Salehuddin acknowledged that the government has been under mounting fiscal pressure due to the structure of many IPP deals.
Several contracts require the state to pay capacity charges to power producers regardless of whether electricity is purchased. In addition, terms guaranteeing dollar-denominated returns and sovereign guarantees have significantly undermined Bangladesh’s bargaining power.
“These contracts have resulted in considerable financial obligations for the government,” he said, adding that reforming these agreements is critical to ensuring long-term sustainability and restoring public confidence.
The High Court also instructed the government to ensure optimal use of state-run power plants, many of which were neglected over the past decade in favour of private projects-often with political backing.
The current administration has signalled its intention to rebalance the energy mix and enhance accountability in the sector.Experts and civil society groups have long criticised the overreliance on quick rental and privately operated power plants, warning of unsustainable fiscal burdens and a lack of transparency in project approvals.
With the review process now underway and legal experts being engaged, the government appears poised to reform the power sector’s policy framework, reinforcing governance, reducing unnecessary expenditure, and aligning energy development with public interest.