In 1957, a newly formed electricity directorate acquired all the private power stations and transmission lines through Pakistan, which included East Pakistan (now Bangladesh), and, in 1958, East Pakistan Water and Power Development Authority (EP-WAPDA) was formed to effectively manage the power sector in the then East Pakistan (Bangladesh), which merged with the electricity directorate in 1960. After independence, the government of Bangladesh (GOB) demerged WAPDA by Presidential Order 59 to form the Bangladesh Power Development Board (BPDB) under the supervision of the Ministry of Power, Energy & Mineral Resources (MPEMR). BPDB was further demerged to form the Rural Electrification Board (REB) and the Dhaka Electric Supply Authority (DESA), and, in 2000, the transmission lines were handed over to the newly formed Power Grid Company of Bangladesh (PGCB). The generation of electricity has been privatised partially but the transmission and distribution are still under state monopoly as stated above.

• Generation – As of today, BPDB is responsible for generation of most of the country’s total electricity demand. BPDB owns and operates most of the major public sector power projects to generate power itself and acts as the major offtaker of power generated by private power producers which were mandated to generate power privately for the first time vide the Private Sector Power Generation Policy, 1996 (the “Policy”). On the supply side, BPDB functions as a single buyer by purchasing electricity from Independent Power Plants (IPPs) which need to enter into a long-term PPA with BPDB through public tendering and unsolicited proposal basis.
• Transmission – PGCB owns the entire national grid system and manages electricity transmission to the whole of Bangladesh. PGCB acts as the interconnection stakeholder to all IPPs. Under the Policy, the developer of the IPP is required to build interconnection up to a PGCB-specified point in the relevant substation at its own cost, and after the commercial operation date (COD) needs to transfer such interconnection facility up to the generation plant connection point to PGCB.
• Distribution – After purchasing electricity, BPDB sells bulk electricity to all the distributing entities, which are mostly autonomous state-owned enterprises. BPDB is responsible for distribution of electricity except Dhaka and the western and northern zone. In Dhaka, western and northern zone it distributes electricity through several state-owned enterprises in which it also holds shares.
• Storage – Storage is a new concept in Bangladesh. Whereas storage is an integral part for renewable IPPs, standalone storage plants are yet to be commercially realised in Bangladesh. The government under its Integrated Energy and Power Master Plan (IEPMP) 2023 has proposed setting up demonstrative renewable energy storage schemes, but has yet to finalise the framework for such implementation.

Principal laws that govern the ownership and structure of the power industry include the following.

• The Electricity Act, 2018 – Substituting its predecessor Electricity Act, 1910, this is the major law that establishes the framework and implementation premise of generation, transmission and distribution of electricity and underlying servicing aspects of electricity in Bangladesh.
• The Companies Act, 1994 – The main law that establishes the legal and procedural aspects of establishing a company, its incorporation, governance, compliance and maintenance in Bangladesh.
• Private Sector Power Generation Policy of Bangladesh, 1996 – The policy that outlines the framework, security package and contractual structure for private power generation in Bangladesh.

The power sector in Bangladesh is unbundled with generation, transmission and distribution. The government has six generation, one transmission and five distribution entities. The following are the major participants in this sector.

• Power Division – The Power Division, which is a division under MPEMR, is responsible for all policies and matters relating to electricity generation, transmission and distribution from conventional and non-conventional energy sources including hydro-electricity.
• Power Cell – In order to translate the commitment under the Private Sector Power Generation Policy into actual investment projects,  the government of Bangladesh set up a Power Cell under the MPEMR in 1995. The Power Cell has a mandate to lead private power development, recommend power sector reforms and restructuring, conduct study on tariffs and formulation of a regulatory framework for the power sector. The Power Cell shall facilitate all stages of promotion, development, implementation, commissioning and operations of private power generation projects and suitably address the concerns of project sponsors.
• Bangladesh Sustainable and Renewable Energy Development Authority – SREDA is an agency under the Power Division enacted by SREDA Act, 2012. SREDA is acting as a focal point for sustainable energy development and promotion, ‘sustainable energy’ comprising renewable energy and energy efficiency. It is monitoring the implementation of the Energy Efficiency and Conservation Master Plan up to 2030. It provides co-ordination of sustainable energy planning, including action plans linking together the activities of several agencies, promotes awareness of renewable energy and other clean energy technologies, and integrates their development within overall national energy policy and development.
• Bangladesh Power Development Board – Incorporated under the Bangladesh Power Development Boards Order, 1972, BPDB is a board under the administration of MPEMR and is responsible for a major portion of the generation and distribution of electricity in Bangladesh. It also acts as the statutory offtaker of power generated by the private sector. BPDB also distributes electricity directly to all areas except the areas where distribution is done by Rural Electrification Board (mostly in rural areas), Dhaka Power Distribution Company and Dhaka Electric Supply Company (in Dhaka), West Zone Power Distribution Company (West Districts) and Northern Electricity Supply Company Ltd (North Districts).
• Power Grid Company of Bangladesh – PGCB has been entrusted with the responsibility of owning the national power grid and operating and expanding the same with efficiency. PGCB acts as the interconnection stakeholder to all IPPs.
• Bangladesh Energy Regulatory Commission (BERC) – BERC regulates and issues licences to power and energy sector stakeholders and acts as the independent regulator for the sector to ensure fair competition and conduct.

Currently there are no foreign investment restrictions that apply to the power industry and investment can be made by any investor from any country recognised by Bangladesh. However, as per the Bangladesh Industrial Policy, the power sector is a controlled sector and any investment in this sector is required to be properly licensed. There is no investment limit threshold as long as the relevant qualification (in terms of prior experience in similar size of investment, debt financing and operation, and so on) is met. There is also no restriction on holding of land rights through a Special Project Vehicle (SPV) and even 100% foreign-owned SPVs can hold lands.

Investment Protection

The Foreign Private Investment (Promotion and Protection Act), 1980 grants protection to foreign investments in Bangladesh, ensuring the following. 

• Fair and equitable treatment to enjoy full protection and security in Bangladesh.
• The terms of sanction, permission or licence granted to an industrial undertaking having foreign private investment shall not be unilaterally changed so as to adversely alter the conditions under which the establishment of such undertaking was sanctioned.
• Foreign private investment shall not be accorded a less favourable treatment than what is accorded to similar private investment by the citizens of Bangladesh.
• In the event of losses of foreign investment due to civil commotion, insurrection or riot, foreign private investment shall be accorded the same treatment with regard to indemnification, compensation, restitution or other settlement as is accorded to investments by the citizens of Bangladesh.
• Foreign private investment shall not be expropriated or nationalised or be subject to any measures having a similar effect except for a public purpose against adequate compensation which shall be paid expeditiously and be freely repatriated.
• The repatriation of capital and the returns from foreign investment and, in the event of liquidation of industrial undertaking having such investment, of the proceeds from such liquidation is guaranteed.

Protection is also available under various bilateral investment treaties (BITs) entered into by and between Bangladesh and other foreign countries. Countries with whom Bangladesh has concluded BITs include Austria, Korea, DPR, Thailand, Belgium, South Korea, UK, Canada, Malaysia, USA, Pakistan, Uzbekistan, France, Poland, Vietnam, Germany, Romania, Singapore, Indonesia, Switzerland, Denmark, Iran, The Netherlands, India, Italy, The Philippines, UAE, Japan and Turkey.

Access to Court and Foreign Arbitration

Foreign investors and corresponding SPVs shall have general access to the local courts. In addition, Bangladesh courts uphold choice of foreign law and party autonomy as agreed among the parties while entering into the contract. It was decided in PLD 1964 Dacca 637 that when the intention of the parties to a contract as to the law governing the contract is expressed in words, this expressed intention determines the proper law of the contract and in general overrides every presumption. However, enforcement of judgment is allowed only from those countries that have reciprocal co-operation with Bangladesh for such enforcement of judgment. Currently only Indian judgments are enforceable in Bangladesh.

Bangladesh is a member of the New York Convention. International arbitration is permitted under the Arbitration Act, 2001 of Bangladesh. Parties are free to choose the arbitral tribunal and underlying rules. Foreign arbitral awards are enforceable in Bangladesh and awards are required to be filed in the court of first instance to be enforced against the debtor or its assets. The court in which recognition or execution of the foreign arbitral award is sought may refuse to enforce such foreign arbitral award:

• if the party against whom it is invoked furnishes proof to the Court that –
1. a party to the arbitration agreement was under some incapacity;
2. the arbitration agreement is not valid under the law to which the parties have subjected it;
3. the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable due to some reasonable cause to present his case;
4. the foreign arbitral award contains decisions on matters beyond the scope of the submission to arbitration;
5. the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, alternatively, the law of the country where the arbitration took place; or
6. the award has not yet become binding on the parties, or has been set aside or suspended; or
• if the court finds that –
1. the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force in Bangladesh; or
2. the recognition and execution of the foreign arbitral award conflict with the public policy of Bangladesh.

It may be noted that an arbitral award from an international commercial arbitration held offshore cannot be set aside. Furthermore, a set-aside order against an arbitral award from an international commercial arbitration held in Bangladesh cannot be appealed. Unless otherwise waived by the parties under Section 7A of the Arbitration Act, 2001, the High Court may grant an interim injunction to protect the rights of any party in an injunction to preserve the subject matter in connection to a domestic arbitration.

Foreign Exchange Regulations

Bangladesh has a very strict foreign exchange control regime under the Foreign Exchange Regulation Act, 1947 (FERA). Generally speaking, conversion and repartition of foreign exchange require approvals of Bangladesh Bank. For certain transactions no prior approval from Bangladesh Bank is required and banks arrange summary approvals from Bangladesh Bank as outlined under the Guidelines to Foreign Exchange Transactions (GFET), eg, foreign investment, divestment, repatriation, technical fee, royalty, consultation fee, distribution fee, dividend, loan repayment including interest payment, and import/export.

A Bangladeshi company may, in a shareholders’ general meeting, declare dividends to its shareholders from time to time. Banks arrange summary approvals from the central bank for repatriation of dividends to the non-resident shareholders. For sale of shares involving non-resident shareholders, a fair valuation is required and a post-closing notification to the central bank is essential. However, prior approval of Bangladesh Bank is required for repatriation of sales proceeds arising from a non-resident’s sale of shares in a non-listed company. Liquidation proceeds can also be repatriated as per the procedure laid out in the GFET. Foreign borrowing needs approval from regulatory authorities nominated by the central bank and is fairly easy for industrial and infrastructure projects.

Investment Incentives

Bangladesh has the following investment incentives.

• For independent power plants (IPPs) (other than coal-fired IPP) commencing production before 30 June 2024, a tax exemption on income tax is available for 12 years, including:
1. three years’ tax exemption on income of expatriate employees;
2. tax exemption on interest earned by foreign lenders;
3. tax exemption on technical know-how, royalty and technical assistance fees; and
4. tax exemption on capital gain earned from transfer of shares.
• For IPPs commencing production after 30 June 2024, the tax holiday is 100% exemption during the first five years, 50% exemption during the next three years and 25% exemption during the next two years.
• For power projects, no VAT is charged over earning against supply of power.
• Companies will be allowed to import plant and equipment and spare parts up to a maximum of 10% of the original value of total plant and equipment within a period of 12 years of Commercial Operation without payment of customs duties, VAT (Value Added Tax) and any other surcharges as well as import permit fee except for indigenously produced equipment manufactured according to international standards.
• Companies will be exempted from requirements of obtaining insurance/reinsurance only from the National Insurance Company, namely Sadharan Bima Corporation (SBC). Private power companies will be allowed to buy insurance of their choice as per the requirements of lenders and the utilities. Foreign insurance shall be available only for those policies which are not available in Bangladesh.
• Instruments and deeds required to be registered under local regulations will be exempted from stamp duty payments.

Restrictions in General and Control Regime

There are no restrictions regarding the sale of power industry assets or businesses, or other transactions, including amalgamations and mergers in general. The Bangladesh Competition Commission has been formed under the Bangladesh Competition Act, 2012 to ensure competition in all industries. The BERC also retains some power to maintain competition as a first-tier regulator for power generation industries. The Bangladesh Competition Commission (BCC) still acts on a reactive basis as it is yet to formulate and enact the competition rules for merger control.

However, any combination (including acquisitions, amalgamation or mergers) in the goods and service market that adversely affects competition or creates a cause to adversely affect competition is prohibited. The BCC has wide powers to investigate any combination that adversely affects competition on its own motion or under complaint from any third party.

There are currently no minimum requirements that must be satisfied by a purchaser of assets or an acquirer of a business, such as market influence, financial metrics and industry expertise.

Contractual Lock-In

As per a prevailing implementation agreement (Concession Agreement) applicable to power projects in Bangladesh, it may be noted that the main sponsor (Lead Member) identified by the competent authorities will be required to hold at least 51% of equity until the COD and 40% thereafter until the sixth anniversary of the COD. An operating sponsor (Operating Member) that is identified by the competent authorities is required to maintain at least 20% of equity until the COD and 11% thereafter until the sixth anniversary of the COD.

A transfer that circumvents these lock-ins needs express approval from the offtaker, which is difficult to obtain, and needs to demonstrate the qualification of the purchaser and overall good impact over the industry.

Power Division

The Power Division under MPEMR is the central authority that oversees and administers the electricity supply and the development of transmission and distribution facilities to ensure the reliability of the electricity system and the adequacy of supply to satisfy the demand for electricity. Its function includes:

• formulation of all policies and matters relating to power;
• formulation of general policies relating to generation, transmission and distribution of electricity, including thermal power, hydro and mini hydro-electricity, etc;
• formulation and administration of National Power Policy;
• regulation and development for electrical energy;
• regulation of electrical energy as fed into the electricity grid from any nuclear power plant;
• acquisition and revocation of licence for electrical undertaking;
• promulgating rules under the Administration of Electricity Act, and allied matters;
• administration and control of Bangladesh Power Development Board, Rural Electrification Board, Office of the Electrical Adviser and Chief Electric Inspector and Dhaka Electric Supply Authority; and
• undertaking any other matter relating to ⎯
1. Bangladesh Power Development Board;
2. Rural Electrification Board;
3. Office of the Electrical Adviser and Chief Electric Inspector; and
4. Dhaka Electric Supply Authority.

These include electricity supply adequacy, generation planning and development, and transmission system planning and development through its departments. Accordingly, the Power Division has prepared Integrated Energy and Power Master Plan (IEPMP) 2023 and is overseeing its implementation.

Power Cell

Under supervision of the Power Division, the Power Cell has a mandate to lead private power development, recommend power sector reforms and restructuring, conduct study on tariffs and formulation of a regulatory framework for the power sector. The Power Cell shall facilitate all stages of promotion, development, implementation, commissioning and operations of private power generation projects and suitably address the concerns of project sponsors.

SREDA

On the other hand SREDA, as an agency under the MPEMR:

• provides co-ordination of sustainable energy planning, including action plans linking together the activities of several agencies or organisations;
• promotes awareness of renewable energy and other clean energy technologies and integrates their development within overall national energy policy and development;
• supports demonstration of new technologies and new business models for renewable energy and other clean energy technologies;
• supports establishment of small and medium renewable energy enterprises and providers;
• enables systematic development of renewable energy projects and opportunities through energy audits;
• creates market opportunities and start-up business models for sustainable energy technologies in Bangladesh, such as energy services companies and rural energy providers;
• develops financing mechanisms and facilities by using grant, subsidy and/or carbon/CDM fund for public and private sector investments in all forms of sustainable energy;
• collects data and assesses the renewable energy resource base, especially in the context of the rural energy master plan;
• provides funds for the development of standardised renewable energy configurations to meet common energy and power applications, such as solar, biogas and bio-diesel for mechanical irrigation, and improved community practices for forest management and conversion and use of fuel wood by using grant, subsidy and/or carbon/CDM fund;
• stimulates market development for sustainable energy technologies, such as improved cook stoves and household biogas digesters;
• provides financial support in the research and development of renewable energy technology;
• implements policies for mitigation of environmental issues arising out of the use of renewable energy; and
• solicits and processes grid-connected renewable energy projects.

There have not been any material changes in law or regulation regarding the power industry over the past year.

There have not been any announcements regarding new policies or initiatives that would result in material changes for the power industry.

In line with the Policy, currently the conventional power purchase agreements (PPAs) for fossil fuel IPPs provide for a capacity payment and an energy payment. Capacity payment is required to be paid irrespective of energy delivery (for market issues or government failure to provide fuel). However, the government is reportedly considering abolishing capacity payments for future fossil fuel projects. For renewable PPAs, the government only pays energy on the basis of “take or pay”.

Furthermore, the government is also thinking of denominating the tariff entirely in Bangladeshi Taka, as addressed in 2.1 The Wholesale Electricity Market.

Captive Power Plant

Under the Captive Power Plant Policy (CPPP), Captive Power Plants have been defined as power projects that produce power as per their own use or for the use of a group. Such power produced may be sold at a predefined rate not exceeding the rate at which BPDB sells power to distributors excluding the wheeling charge. The producer is required to enter into a PPA as per the template incorporated in CPPP. Connection to the grid is possible at its own expense and PGCB may charge a wheeling fee. A licence for power generation is also required to be procured from BERC. To connect to the grid, its capacity must be higher than 20 MW.

Small Power Plant

Small Power Plants are defined as power plants with a capacity of less than 10MW. Such power produced may be sold to anyone at a predefined rate where BPDB, DESA (Dhaka Electric Supply Company) and REB (Rural Electrification Board) are present, and for other areas the price may be mutually negotiated. Connection to the grid is possible at its own expense and PGCB may charge a wheeling fee. A licence for power generation is also required to be procured from BERC. Small Power Plants may sell electricity to BPDB distributors or to large consumers, which include Export Processing Zones, Special Economic Zones, Private Economic Zones, Hi-Tech Parks, Large Real Estate, etc meeting the following voltage level and load characteristics:

• consumers connected to the national grid through transmission lines of 33kV and above having connected load of not less than 5 MW;
• consumers connected at 33kV or 11kV lines of distribution utilities having connected load of not less than 1 MW; and
• consumers connected at 11 kV or 0.4kV lines of distribution utilities having connected load of not less than 1 kW in case of renewable energy projects.

Net-metering

Net-Metering Guideline 2018 (NMG2018) allows Captive Power Plant, Small Power Plant and private solar grids to be connected to the national grid through the distributor in the corresponding area by way of executing a net-metering agreement. Within a 12-month settlement period any export of electricity with the system can be adjusted against any import from the local distributor. After the settlement period, if there is net export then such export is settled by way of cash payments by the distributor/utility.

Currently there is no open market either in form of capacity market or energy market in Bangladesh. As a single buyer, BPDB procures power from independent power producers (IPPs), small power producers (SPPs), corporatised generation companies and other publicly owned power plants based on negotiated bulk power tariff rates. These rates are based on fuel type, plant load factor and other operational parameters. BPDB exercises its inherent power to purchase electricity at a negotiated price under the Bangladesh Power Development Boards Order, 1972 with due approval of inter-ministerial committees. Generally, it enters into a PPA extending up to 20 years as per the Policy, which is upheld and valid up to the duration of the PPA. BPDB renegotiates the tariff with the developer after the expiry of the consecutive PPA term. As per the Policy, the tariff generally includes the following.

• Capacity Payment – linked to a certain level of availability of the power plant. It covers debt service, return on equity, fixed operation and maintenance cost, insurance and other fixed costs. The capacity payment is further divided into an escalating portion and a non-escalating portion. The capacity payment is paid in Bangladesh currency (BDT), but denominated in both USD (to repay foreign loans and fixed costs in foreign currency) and local currency (to repay local loans and investment and fixed costs in local currency). The portion denominated in USD will be converted into taka at the exchange rate subsisting at the date of payment and paid in BDT. The capacity payment is generally adjusted for inflation.
• Energy Payment – covers the variable costs of operation and maintenance, including fuel, and is paid in taka. The payment is further divided into fuel component, which is a pass-through, and a non-fuel component, which escalates. The energy payment is denominated in both BDT and USD, depending on the currency of the underlying variable costs incurred. The portion denominated in USD will be converted into taka at the exchange rate subsisting at the date of payment and paid in BDT.

There is also a mechanism for the adjustments of certain tariff components to variations in taka/dollar exchange rate, fuel price and inflation rates. Based on experience, in renewable IPPs the tariff is dominated in USD only against energy payments. In general, the payment mechanism adopted in PPAs is take or pay mechanism, except, where there is an interconnection failure attributable to offtaker or interconnector, offtakers liability to pay is limited up to dependable capacity agreed in the PPA. For renewable power projects only Energy Payment is payable.

On the other hand, BPDB sells electricity to the distribution utilities at wholesale tariff rates. These wholesale tariff, transmission tariff and distribution tariffs are used to deduce the retail tariff, all of which are regulated by the Bangladesh Energy Regulatory Commission (BERC) as per the regulations below.

• Bangladesh Energy Regulatory Commission (Power Generation Tariff) Regulations, 2008 – establish the procedures for adjustment of tariffs at which power is fed into the transmission system.
• Bangladesh Energy Regulatory Commission (Power Transmission Tariff) Regulations, 2016 – establish the procedures for adjustment of tariffs at which power is transmitted into the transmission system.
• Bangladesh Energy Regulatory Commission (Retail Distribution) Regulations, 2016 – establish the procedures for adjustment of tariffs at which power is distributed at retail level.

Latest tariff orders (both feed in and terminal) are located on the BERC website. Over the last decade, Bangladesh has seen an increase in the price of the consumer tariff at least ten times in attempts to lessen the gap between the income from consumers and expenditure by way of guaranteed capacity payments to power producers of BPDB. BERC is in the process of enacting a BERC (Tariff For Rooftop Solar PV Electricity) Regulation as currently such prices are negotiated between the developer and the user.

However, for captive power plants selling electricity to any utility undertaking, the tariff shall not exceed the published tariff by which BPDB sells power at 132 kV (Category G1) excluding wheeling charges provided that, for increase of price of fuel, the fuel component of the tariff for purchase of power from the captive power plant may be adjusted. The tariff of captive power plant is required to be pre-approved by BERC.

There are no restrictions for imports and exports of electricity to/from other jurisdictions in Bangladesh in general. However, as a single buyer, BPDB procures power from independent power producers and those independent power producers are not allowed to export electricity.

BPDB may procure import of electricity from other jurisdictions following the public procurement procedure, which in turns needs approval from the Cabinet Committee of Government Purchase (CCGP). So far, BPDB has entered into one cross-border PPA with a power producer in India.

Such import is permitted when the authorities deem that such import is necessary to maintain and secure supply of electricity in Bangladesh. As explained above, like local PPAs, BPDB is authorised to negotiate tariffs for such offshore supply of electricity.

Currently, Bangladesh has transmission interconnections with India only.

As of June 2023, the power generation capacity of Bangladesh amounts to 24,911 MW, encompassing a diverse range of sources. Combined cycle plants contribute the most with 8,363 MW (33.57% of total capacity), followed by reciprocating engines with a significant 8,023 MW (32.21% of total capacity). Steam turbines contribute 3,742 MW (15.02% of total capacity), gas turbines add 1,438 MW (5.77% of total capacity), and hydro power plant provides 230 MW (0.92% of total capacity). Solar PV systems contribute 459 MW (1.84% of total capacity), while power imports add 2,656 MW (10.66% of total capacity).

Bangladesh’s power generation is sourced from a diverse range of fuels. Bangladesh’s power generation is predominantly fuelled by gas, making a significant share with 11,372 MW (45.65%). Furnace oil follows with 6,492 MW (26.06%), coal provides 2,692 MW (10.81%), and power imports contribute 2,656 MW (10.66%). Diesel adds 1,010 MW (4.05%), hydro contributes 230 MW (0.92%), and solar PV systems contribute 459 MW (1.84%).

The IEPMP forecasts a maximum demand of between 27.4 and 29.3 GW in 2030, between 50.4 and 58.6 GW in 2040 and between 70.5 and 96.8 GW in 2050, with a target of renewable power generation to the extent of 10%, 22% and 35% in 2030, 2040 and 2050 respectively.

Currently, there are no concentration limits regarding the percentage of electricity supply. However, if such a concentration limit is imposed, it is likely that BERC would have authority and oversight on such implantation.

Bangladesh is yet to facilitate a fully functional competitive market in the sector of electricity generation, transmission and distribution. The Bangladesh Competition Commission has been formed under the Bangladesh Competition Act, 2012 to ensure competition in all industries. It also retains some power to maintain competition as a first-tier regulator for power generation industries. BERC has been authorised to ensure fair competition in this sector, to conduct surveillance of the market to detect anti-competitive behaviour and to undertake enforcement under the BERC Act, 2003, where it has been accorded with relevant investigative powers. However, a detailed rule on the parameters of such fair competition, the process for surveillance and its enforcement is yet to be enacted. Violation of the BERC Act, 2003 is punishable with imprisonment for a term not exceeding three years or with a fine not less than BDT5,000 or with both, and in case of continuation of the offence they shall be fined with an amount not exceeding BDT3,000 for each day of continuation.

Under the Competition Act, 2012, any anti-competitive behaviour limiting competition is prohibited. Any act shall be deemed to have an adverse effect on competition in the market if it:

• directly or indirectly –
1. determines abnormal purchase or sale prices, or
2. determines a deceptive price in all processes, including bid rigging;
• limits or controls production, supply, markets, technical development, investment or provision of services; or
• divides the market on the basis of types of goods or services, sources of production or provision of services, the geographical area of the market, or the number of customers in the market or any other similar basis.

In addition, the Competition Act, 2012 specifically declares the following practices as anti-competitive:

• tie-in arrangement;
• exclusive supply agreement;
• exclusive distribution agreement;
• refusal to deal; and
• resale price maintenance.

The Competition Commission has been empowered to investigate and adjudicate any complaint following the Code of Criminal Procedure. For any non-cooperation, it can sentence up to one year’s imprisonment or fine for other offences. Appeal is possible by paying 10–25% of the fine.

The principal laws that govern the construction and operation of generation facilities are as follows.

• Bangladesh Power Development Boards Order, 1972 – It establishes the authority of BPDB, including its authority to award generation concession and purchase electricity from the private and public sectors.
• Private Sector Power Generation Policy of Bangladesh, 1996 (Revised 2004) (the “Policy”) and Policy Guidelines For Enhancement of Private Participation in the Power Sector, 2008 (SPP) – The Policy regulates foreign investment in the power industry in Bangladesh and sets out, among others, the procedures for the procurement of foreign invested power projects as well as the financial arrangements and incentives that will be provided to the foreign invested power projects. The SPP is an extension to the policy with enhanced scope allowing joint venture between public and private entities and other aspects of private sector power generation.
• Renewable Energy Policy of Bangladesh (REPB), 2008 – REPB further provides additional institutional arrangements, resource, technology and programme development, investment and fiscal incentives and regulatory policy for renewable power plants under private participation.
• Public Procurement Act, 2006 and Public Procurement Rules, 2008 – In principle, the Public Procurement Act outlines the major consideration for public procurement, different procurement methods such as local, international, etc, the process to be followed by each kind of proposal and underlying governance principles. A detailed methodological set of rules describing each processes in detail has also been enacted in the form of the Public Procurement Rules, 2008. This is the procurement law that BPDB uses to procure electricity in Bangladesh.
• Power and Energy Fast Supply Enhancement (Special Provision) Act (PEFSE) – The PEFSE was enacted in 2010 and amended in 2015 with the objective of facilitating the increase of electricity production and transmission in various sectors of Bangladesh such as agricultural, industrial, trade and household. The PEFSE supplements the Public Procurement Act 2006 to enable the government to adopt a fast-track process in the power and energy sector.
• Bangladesh Energy Regulatory Commission Act 2003 (BERCA) – The BERCA empowers the Bangladesh Energy Regulatory Commission to issue, renew, revise and revoke the licences to all entities involved in power generation, transmission and distribution. It implements important regulations such as:
1. Bangladesh Energy Regulatory Commission (Electricity Grid Code) Regulations, 2018;
2. Bangladesh Energy Regulatory Commission (License) Regulations, 2006;
3. Bangladesh Energy Regulatory Commission (Power Generation Tariff) Regulations, 2008;
4. Bangladesh Energy Regulatory Commission (Power Transmission Tariff) Regulations, 2016; and
5. Bangladesh Energy Regulatory Commission (Retail Distribution) Regulations, 2016 (establishing the procedures for adjustment of tariffs at which power is distributed at retail level).
• Policy Guideline for Power Purchase from Captive Power Plants (PGPPCPP) 2007 (renewed in 2019) and Policy Guideline for Small Power Plant (SPP) in Private Sector (PGFDPP) – These policies provide guidelines for captive, small and distributed power plants and how they can sell generated power to large government intermediaries such as economic zones, how to connect to the grid and what should be the tariff.
• Net-Metering Guideline 2018 (NMG 2018) – NMG 2018 provides the standards to connect to the grid, cases on how to deal with the credit with respect to net import and export of electricity, adjustments and how to get reimbursed for net export.

Other important laws that also influence the construction and operation of generation facilities include the following.

• Environmental laws – The major environmental regulations include the Bangladesh Environment Conservation Act, 1995 and the Bangladesh Environment Conservation Rules, 2023, which provide the framework for environmental clearances at various stages, including the mandatory impact assessment reports to be submitted during procurement of the environmental clearance.
• Land-related laws – Acquisition and Requisition of Immovable Property Act, 2017 applies to acquiring any land for any public purpose. It also applies in determining the amount of compensation to be awarded for any property to be acquired. The Electricity Act, 2012 defined such acquisition/right of way over land for power generation and transmission as public purposes.
• Other construction-related laws:
1. Building Construction Act 1952;
2. Town Improvement Act 1953;
3. Building Construction Rules 1996;
4. Natural Water Bodies Protection Act 2000;
5. Dhaka Metropolitan Building (Construction, Development, Preservation and Demolition) Rules 2008;
6. Bangladesh National Building Code 2020; and
7. Local Government Acts.

Award of Concessions

IPPs are awarded as per the Private Sector Power Generation Policy for a term (generally 15–20 years) negotiated between the offtaker (BPDB) and the power producer. The concession is awarded in the form of a letter of intent (LoI) and after attaining the required conditions. The concession contract is executed in the form of an Implementation Agreement that commits government obligations to the project, a PPA that includes the terms of offtake, and, in appropriate cases, along with a fuel supply agreement and a land lease agreement. The tariff structure has been discussed in 2.1 The Wholesale Electricity Market.

The LoI is required to be accepted by the awardee by way of submitting a security in the form of an irrevocable and unconditional bank guarantee. The purchase and payment obligations of the offtaker under the PPA and the interconnection-related obligations of PGCB are guaranteed by the government by executing a guarantee agreement. Currently, the following are the processes under which BPDB awards PPAs in favour of private sector power generators.

• Public Procurement Act, 2006 (PPA2006) read with the Policy– Under this, a public tender is floated to procure development proposals to supply power. Generally, a two-stage method (request for qualification (RFQ) followed by request for proposal (RFP)) is adopted, but one-stage proposals are also followed sometimes. A Technical Evaluation Committee (TEC) is formed, which ranks the proposals based on a predefined matrix and awards the tender to the top bidder subject to approval from MPEMR and the Cabinet Committee of Government Procurement (CCGP).
• PPA2006 with PEFSE Application– Under this, the PPA2006 procedure and rules are followed, but the TEC can pick any bidder irrespective of ranking to negotiate with such bidder, and after such negotiation the TEC can recommend the award to any such bidder. The proposal is then sent to MPEMR for approval and then for approval from CCGP. Upon their approval, the project is awarded to the TEC-recommended bidder.
• Power and Energy Fast Supply Enhancement (Special Provision) Act (PEFSE)– Under this, once MPEMR receives an unsolicited proposal, it sends MPEMR’s relevant requirements, if any, to be approved by the Planning Ministry. Once approved, a Technical Evaluation Committee is formed to check the proposal and, upon completion of its evaluation, the proposal is sent to MPEMR for approval and then for approval from CCGP. Upon their approval, the project is awarded to the unsolicited bidder. SREDA has published specific guidelines for unsolicited proposals for renewables such as solar and wind IPPs.

As per the Unsolicited Proposal Guideline for Solar Projects, the applicant needs to meet the following criteria.

• For the lead member and operating member of the consortium: Current assets divided by current liabilities = no less than 1:1 in two of the last three fiscal years and positive profitability in two of the last three fiscal years.
• Net worth must be equal to or in excess of USD0.5 million for each MW of offered capacity.
• The lead member has successfully raised equity and debt financing of at least USD0.3 million/MWp and USD1 million/MWp respectively of offered capacity in aggregate in the past 15 years.
• The lead member or operating member’s references to successful installation, operation and management of solar power projects including at least one grid-connected solar power project capacity of 10% of offered capacity or more, which is connected to the national power grid in the country and which must have been in operation for not less than two years.
• The lead member or operating member’s references to successful development of solar power projects including at least one grid-connected solar power project capacity of 10% of offered capacity or more, which is connected to the national power grid in the country in which such project is located.

Land Acquisition

If land lease is not a part of the concession, then for the execution of the concession agreements demonstration of land procurement is a prerequisite for the execution of the concession agreements. Bangladesh recognises the concept of freehold title of land, leasehold title, general lease (as per the Transfer of Properties Act), easements and licence (as per the Easements Act, 1882). Whereas for the plant freehold title of land, leasehold title and general lease are accepted, easements and licence are frequently used for transmission lines and wind masts.

Interconnection

As per the policy, the electricity is purchased from the IPP at a specified voltage at the outgoing terminal (interconnection point) of the substation of the power plant as agreed with BPDB. The transmission line for interconnection with the national grid will be either provided by the appropriate agency or otherwise needs to be constructed by the IPP. The costs of interconnecting facilities up to outgoing terminals of the private power projects (including step-up auto transformers, circuit breakers and associated switchgear) will be borne by the private power producers.

The concession agreement incorporates PGCB as a party providing the interconnection point up to which the project company is required to develop relevant facility to supply power. Before construction of the interconnection and transmission line, the IPP is required to negotiate the full interconnection plan with PGCB and get PGCB’s approval.

Environmental Clearance

The environmental laws of Bangladesh consist of the Environmental Policy, 1992 and the Bangladesh Environment Conservation Act, 1995 (ECA) read in conjunction with the Environment Conservation Rules, 2023 (ECR). Formed under the ECA, the Department of Environment (DOE) issues environmental clearance certificates (ECC) subject to issuance of no objection certificates from the local government authorities. Any industrial project (including power projects) must obtain an ECC from the DOE prior to commencement of construction of its project.

The ECR categorises all projects into four divisions:

• Green;
• Yellow;
• Orange; and
• Red.

Power projects fall into the Red category. Prior to construction of a power project (renewables fall in Yellow/Orange category, waste to power and gas-fired IPPS in Orange but gas-fired IPPs above 100MW and coal-fired IPPs are categorised as Red), the project company must obtain relevant certificates in the following order. For the Red category of projects, a full environmental impact assessment (EIA) is required. The EIA must be conducted as per the approved terms of reference. A public consultation is required to be arranged with the inhabitants of the project area and other stakeholders, including experts, and the details of the discussion must be incorporated in the EIA.

• Firstly, a No Objection Certificate from the local government (Union Parishad). It takes around one week to get this before applying for the location clearance certificate (LCC).
• Secondly, LCC from the Department of Environment (DOE) before commencing site preparation work, by way of filing the required application and Initial Environmental Examination report. The LCC application is required to be filed with the proposed terms of reference to conduct the EIA (the EIA process is only relevant for Red category IPPs). After inspection and examination, the authority shall send its report to the relevant environmental clearance committee at the headquarters, which shall consider the application and issue LCC within 30 days of lodgement of the application. Any shortfall of documents is required to be met in seven days.
• Thirdly, after conducting and preparing the EIA, it must be filed with the DOE for its approval. The DoE may seek further clarification, call the applicant before committee or seek further consultation/opinion from other stakeholders. Thereafter, the EIA shall be placed before the chief-controller for approval. Upon approval, a conditional approval shall be issued to commence development works.
• Fourthly, an environmental clearance certificate (ECC) from the DOE must be procured before commencement of operation. Upon completion of construction, an application for ECC is required to be lodged with the DOE, with supporting documents and compliance reports including those measures undertaken under the EIA. After inspection and examination, the authority shall send its report to the relevant environmental clearance committee, which shall consider the application and issue ECC within 20 days of lodgement of the application.

The EIA approval and the ECC will typically be valid for a period of one year from the date of issue and must be renewed 30 days before expiry. The site preparation work can be initiated after an LCC is obtained from the DOE. Development works may be initiated after the EIA approval. In order to obtain the ECC, the company is required to submit an application to the relevant department of DOE along with details of the project and relevant feasibility report, environmental impact assessment, effluent discharge plan and environmental management plan (as applicable to the relevant category). On inspection by the authorised officer at DOE, and after verification of the report and documents, the report is submitted to the DOE, which issues an ECC RED category at a meeting of the Environmental Clearance Committee, a standing committee under the DOE.

It is important to note that it is prohibited to start commercial operation of such an infrastructure without having a valid and concurrent environmental clearance. Any contravention to this may result in two to five years’ imprisonment or BDT100,000–500,000 fine or both may be imposed. The Department of Environment (DOE) also has the power to impose fine, compensation for environmental pollution, improper discharge, failure to take measures as negotiated with DOE and even, at its discretion, shut down any facility that fails to comply with the environmental protection laws and regulations. However, the DOE is required to provide reasonable notice (usually one month’s notice) before exercising such discretion.

In addition to the conditions outlined in 3.2 Obtaining Approvals to Construct and Operate Generation Facilities and the following licences/authorisations, the only other conditions imposed in approvals to site, construct and operate a generation facility are as follows.

• The site cannot contain any agricultural land within it. There are different types of land use purpose class in Bangladesh such as commercial, industrial, agricultural, null, residential, etc. Only agricultural lands are prohibited to be used for power projects. As such all other lands are suitable for use for the Project and generally a change in class is performed for other types of land for the development of an IPP.
• The point at the nearby substation where the interconnection is proposed must have adequate capacity to evacuate the electricity proposed to be supplied.
• The output of the IPP needs to match with the requirements under the Bangladesh Electricity Grid Code 2018 (the “Grid Code”). The required voltage depends on the rating of the substation where the interconnection is carried out. The required frequency is 50 Hz. Variations of frequency and voltage shall be in accordance with the Grid Code. Grid-connected power projects shall be operated under the control of the National Load Despatch Centre (NLDC). To ensure grid operation, there must be arrangements for the operation of the plant in Primary Frequency Control (FGMO), Secondary Frequency Control (LFC) and maintaining system frequency within operating range. The Power Factor of the power delivered by the power plant shall normally be 0.8 (Lagging). Appropriate protection and synchronisation must be ensured.
• For Wind Power Parks, an approval is required from SREDA by way filing of an assessment report showing that the assessment meets necessary standards.

Other approvals include the following (the chronology provided is for a typical IPP).

• After LoI issue until PPA execution:
1. Certificate of Incorporation;
2. Tax Identification Number (TIN) Certificate;
3. Trade Licence; and
4. Business Identification Number Registration.
• After PPA execution until financial close:
1. No Objection Certificate from local government;
2. Industrial Project Registration;
3. Location Clearance Certificate;
4. approval for foreign borrowing;
5. approval for opening accounts denominated in foreign exchange;
6. approval for foreign insurance or reinsurance;
7. registration of the executed financing documents;
8. Environmental Impact Assessment (EIA) approval;
9. approval from Department of Forestry;
10. relevant approval for construction of electrical interconnection facility; and
11. easement/licence to use of any land or acquisition of any land.
• From financial close until construction start:
1. import permit with approval for exemption of import duty and VAT;
2. exemption from registration duty of relevant instruments;
3. exemption from stamp duty of relevant instruments;
4. Import Registration Certificate;
5. No Objection Certificate for shoreline work, jetty, intake and outfall structures etc;
6. clearance from Civil Aviation Authority for any mast;
7. approval for use of deep tube well/river water;
8. approval for connecting electric line to earth; and
9. relevant approval for construction of electrical interconnection facility.
• During construction period until commissioning:
1. issue and renewal of the Environmental Clearance Certificate (ECC);
2. Establishment Licence;
3. Fire Licence; and
4. Electricity Generation Licence.

The primary laws regulating the transfer and ownership of land in Bangladesh are:

• the State Acquisition and Tenancy Act, 1950;
• the Transfer of Property Act, 1882;
• the Registration Act, 1908; and
• the Stamp Act 1899.

As stated above, Bangladesh recognises the concept of freehold title of land, leasehold title, general lease (as per the Transfer of Properties Act), easements and licence (as per the Easements Act, 1882).

Currently, the Acquisition and Requisition of Immovable Property Act, 2017 applies to acquiring any appropriate interest over land for any public purpose. It also applies in determining the amount of compensation to be awarded for any property to be acquired. In the event of the government acquiring any land for any individual or private organisation, it will be required to pay three times more than the market price of the land. In the event of the government acquiring any land for itself, it will be required to pay two times more than the market price of the land. The Electricity Act, 2012 defined such acquisition/right of way over land for power generation and transmissions as public purposes. For this, the following procedure must be followed.

• Obtain recommendation from authority such as the Bangladesh Power Development Board.
• File an application to the District Commissioner/Deputy District Commissioner.
• The District Commissioner/Deputy District Commissioner shall take up the matter and publish a gazette notification.
• Based on the gazette notification, the applicant is free to negotiate and execute easement agreements.
• For unwilling land owners, the applicant needs to file application to the District Commissioner.
• District Commissioner/Deputy District Commissioner to serve a notice on the landowner.
• There shall be one hearing to fix the appropriate compensation.
• The applicant is required to deposit the compensation.
• An award is then made by the District Commissioner/Deputy District Commissioner.

For private procurement of land (by way of acquisition), the project company is responsible for relocation and resettlement of business, facilities and residents. For public land lease, it depends on the lease agreement and the concession. In most of the cases where public land is leased, it is taken care of by the lessor. Whereas there is no statutory obligation (unless the project is funded by world bank or IDA credit), in most of the cases such rehabilitation/resettlement is imposed as a condition under the ECC; and, also, in many cases the prospective lenders place emphasis on IFC guidelines and equator principles for such resettlement.

In general, under such framework (ie, IFC guidelines), the Project Company is required to ensure that:

• the sellers of land are doing so willingly;
• appropriate compensation is being paid as per the prevailing market rate;
• non-owner inhabitants are properly rehabilitated; and
• social structures are appropriately shifted.

To perform such relocation and resettlement of business, facilities and residents, the standard practice is that a non-governmental organisation (NGO) is appointed to prepare the Rehabilitation Action Plan (RAP). Upon finalising the RAP, the company needs to allocate a fund from its budget for the RAP and the NGO makes use of the rehabilitation fund appropriately to implement the RAP.

For decommissioning of power plants, there is no separate guideline or regulation. However, the IPP owner needs to ensure that the terms of the environmental clearance are maintained during the decommissioning process, which needs the owner to restore the site on an “as was” basis. There is no obligation to fund decommissioning over the physical life of the facility and it can be funded at the end of its physical or economic life.

Construction and operation of transmission lines and associated facilities are not allowed for the private sector. For the public sector, the law that governs such ownership, construction and operation is the Electricity Act, 2018. In addition, other than the private sector policies and Net Metering Guidelines, the laws stated in 3.1 The Construction and Operation of Generation Facilities also apply to such ownership, construction and operation of transmission lines by public authorities.

In addition to the approvals to be awarded to the contractors and other laws and regulation stated in 3.2 Obtaining Approvals to Construct and Operate Generation Facilities,before construction and operation of a new or new segment of transmission lines PGCB needs approval from MPEMR and then from the Executive Committee of the National Economic Council (ECNEC). Thereafter, PGCB can perform public procurement for the engineering, procurement and construction (EPC) contractors (as per 3.2Obtaining Approvals to Construct and Operate Generation Facilities)and finally needs approval from CCGP for the award of the contract.

Other than those stated above and certain licences/permits as stated in 3.3 Approvals to Construct and Operate Generation Facilities, no further terms and conditions are imposed on approvals to construct and operate a transmission line and associated facilities.

The premise stated in 3.4 Eminent Domain, Condemnation or Expropriation Rights equally applies to construction and operation of transmission lines and associated facilities.

As of now, PGCB has monopoly rights to provide transmission service within Bangladesh.

The BPDB sells electricity to the distribution utilities at wholesale tariff rates. These wholesale tariff, transmission tariff and distribution tariffs are used to deduce the retail tariff, all of which are regulated by the Bangladesh Energy Regulatory Commission (BERC). The Bangladesh Energy Regulatory Commission (Power Transmission Tariff) Regulations, 2016 establish the procedures for adjustment of tariffs for power transmitted into the transmission system.

Currently, the PGCB has a negotiated transmission tariff rate agreed with each of the electricity distributors throughout the country. From time to time, the PGCB may apply to the BERC for the escalation of its transmission tariff based on the components outlined in the Bangladesh Energy Regulatory Commission (Power Transmission Tariff) Regulations, 2016. Upon receipt of such application, the BERC conducts a public hearing and decides on the tariff increase by way of government gazette publication.

As the PGCB exercises monopoly rights to provide transmission service within Bangladesh, it is required to provide on an open-access and non-discriminatory basis to all distributors throughout Bangladesh, which are also state-owned entities, subject to the grid capacity of PGCB in corresponding interconnection points as per the Bangladesh Grid Code 2018 against a transmission tariff.

Construction and operation of electricity distribution facilities are not allowed for the private sector. For the public sector, the law that governs such ownership, construction and operation is the Electricity Act, 2018. In addition, other than the private sector policies and Net Metering Guidelines, the laws stated in 3.1 The Construction and Operation of Generation Facilities also apply to such ownership, construction and operation of transmission lines by public authorities.

In addition to the approvals to be awarded to the contractors and other laws and regulation stated in 3.2 Obtaining Approvals to Construct and Operate Generation Facilities, before construction and operation of electricity distribution facilities corresponding utility needs approval from MPEMR and then from Executive Committee of the National Economic Council (ECNEC). Thereafter, the utility can perform public procurement for the engineering, procurement and construction (EPC) contractors (as per 3.2 Obtaining Approvals to Construct and Operate Generation Facilities) and finally needs approval from CCGP for the award of the contract.

Other than those stated above and certain licences/permits as stated in 3.3 Approvals to Construct and Operate Generation Facilities, no further terms and conditions are imposed on approvals to construct and operate distribution facilities.

The premise stated in 3.4 Eminent Domain, Condemnation or Expropriation Rights equally applies to construction and operation of electricity distribution facilities.

As of now, the government exercises monopoly rights to provide distribution services within Bangladesh.

The BPDB sells electricity to the distribution utilities at wholesale tariff rates. These wholesale tariff, transmission tariff and distribution tariffs are used to deduce the retail tariff, all of which are regulated by the Bangladesh Energy Regulatory Commission (BERC). The Bangladesh Energy Regulatory Commission (Retail Distribution) Regulations, 2016 establish the procedures for adjustment of tariffs at which the distributor would sell electricity to end consumer.

Currently, the distributors have a retail tariff rate fixed by the BERC. From time to time, the distributors may apply to the BERC for escalation of its retail tariff based on the components outlined in the Bangladesh Energy Regulatory Commission (Retail Distribution) Regulations, 2016. Upon receipt of such application, the BERC conducts a public hearing and decides on the tariff increase by way of government gazette publication.