Govt stops buying power above average tariff: what it means for the economy and listed power stocks

A Power Division policy to shrink the subsidy burden and align with the IMF reform roadmap, just as Dhaka negotiates a new $4.5–5 billion programme.

Download PDF report

The numbers behind the move

Tk12.80BPDB avg purchase rate per unit

Tk8.50Avg selling rate per unit

Tk4.30Subsidy per unit (about 34% of purchase cost)

Tk28,000 crFertiliser subsidy, up nearly 4x in 5 years

The new purchase policy

No new power purchase agreements at rates above the average tariff.

No tenure extension for existing deals carrying such rates.

Steps conform to the IMF three-year reform roadmap.

Why it matters: who is paying above the line

Adani Power (India)

Tk14.86

IPP overall avg (FY2024-25)

Tk14.56

Rampal power plant

Tk13.57

BPDB avg purchase rate

Tk12.80

Avg selling rate

Tk8.50

Dashed line = BPDB average purchase rate (Tk12.80), shown as a reference point. Rates per unit (kWh). Source: Power Division / BPDB figures via The Business Standard.

Impact on the Bangladesh economy

Positives

Lower subsidy bill eases fiscal pressure and supports the FY2026-27 budget deficit target.

Strengthens the case for a new IMF loan (target: January 2027), which supports reserves and confidence.

Less need for tariff hikes, which helps inflation and industrial costs.

Signals wider subsidy reform: gas, and fertiliser (Krishak Card cash support).

Risks

Letter gives no estimate of actual subsidy savings.

“Average tariff” is technically hard to define across plant types and gas supply.

Global fuel price swings can still widen the gap.

Retailer supply must be protected while prices are kept affordable.

Impact on DSE-listed power sector (indicative view)

Segment	Likely effect	Why
Transmission / distribution(e.g. PGCB, DESCO)	Mildly positive	Healthier BPDB finances may improve payment discipline and tariff stability; frequent returns limit direct exposure.
Older IPPs / rental plants(e.g. Summit, Khulna Power, Doreen)	Cautious	Contracts priced above average tariff cannot be extended. Renewal risk and weaker terminal value as PPAs expire.
Newer, efficient capacity(e.g. UPGDCL-type, renewables)	Mixed	Lower-cost plants gain relative preference, but new PPAs must price at or below average tariff, compressing margins.
Fuel suppliers and wider market	Sentiment +	An IMF deal and reform credibility can lift investor confidence and ease dollar stress across the DSE.

Company names are examples of segment exposure, not recommendations. Effects depend on each firm’s PPA terms and expiry dates.

Key factors for investors

ReceivablesPower producers depend on BPDB dues. Lower subsidy stress can speed collections and cut borrowing costs.

PPA expiry calendarCheck each company’s contract end date and tariff versus the average benchmark.

Fuel and FXGas availability, imported fuel prices and taka movement affect margins regardless of policy.

Policy follow-throughImplementation has to match the announcement, including any renegotiation of existing deals.

What to watch next

Bangladesh–IMF meetingOn the sidelines of the Bangkok annual meetings (12–13 Oct)

New IMF programmeAim to finalise by January 2027; $4.5–5bn under discussion

Average tariff methodA clear, accepted formula for the benchmark

Fertiliser reformPhase-out of price controls and farmer database build-out

Get the full research note

PDF · Market & Policy Insight · 15 October 2026

Download PDF

Investment in the capital market carries risk. This research note is general information, not personal investment advice.

Smarter Research. Better Decisions.

Mika Securities

Prepared by Sajjad Hossain Hridoy

Mika Securities, Stock Broker of Dhaka Stock Exchange