ADB approves $200m loan to upgrade power distribution in Bangladesh
The Asian Development Bank has approved a $200 million loan to help Bangladesh Rural Electrification Board upgrade power distribution across 13 Palli Bidyut Samities serving rapidly expanding industrial and urban areas around Dhaka, where rising demand is putting pressure on the network amid a wider energy crunch.
In a Nutshell:
- The ADB project will upgrade distribution networks across 13 Palli Bidyut Samities around Dhaka.
- It will add 1,150 MVA of transformer capacity at 52 substations and 115 MVA at 12 existing substations.
- More than 2,600 kilometres of overhead and underground distribution lines will be built or upgraded.
- The project will install 900 fault locator sets to identify distribution failures faster.
- ADB says the work will address overloaded substations, ageing infrastructure, power losses and natural hazard risks.
- The loan comes as the government raises fuel prices and expands domestic gas production amid rising energy costs.
Context
The ADB loan for expansion of distribution networks comes at a time where Bangladesh is facing growing energy pressure from the cost of imported fuel. Initially, the government tried to subsidise the cost by keeping domestic fuel prices below import costs but it was unsustainable. Between March and August, BPC incurred Tk 22,875 crore in losses, prompting the government to hike prices. The government has since raised diesel, kerosene, petrol and octane prices by Tk 20 a litre. It is also trying to increase domestic gas production as LNG prices remain high. Titas Well 28 added 12.5 million cubic feet a day to the grid on September 19, and the government plans to drill or rework 150 wells by 2030. The pressure is also showing up in subsidies. Information Adviser Zahed Ur Rahman said almost half of the Tk 48,000 crore allocated for gas and electricity subsidies had been spent within the first two and a half months of the fiscal year. He said the total could reach Tk 1.25 lakh crore to Tk 1.5 lakh crore if spending continued at that rate.
Why it matters
ADB identifies overloaded substations, ageing infrastructure and power losses among the problems the project will address. The project will add 1,265 MVA of transformer capacity, upgrade more than 2,600 kilometres of distribution lines and improve 64 substations. It will also install 900 fault locator sets to help utilities identify failures faster and restore supply. This is particularly relevant while Bangladesh is already struggling with a tight and increasingly costly energy supply. Strengthening the distribution network around the capital cannot increase the amount of fuel or electricity available, but it can improve the system’s ability to deliver available power to the industrial and urban areas where demand is growing.
What we think
There is no reason to treat the $200 million as a solution to Bangladesh's wider energy crisis. The country's fuel costs remain tied to international markets, and the government's own subsidy figures show how quickly those costs are becoming a fiscal problem. The distribution investment can improve the network around Dhaka, but whether that translates into more dependable electricity will also depend on whether enough power and fuel are available to run through it.