Bangladesh’s worsening power crisis is unfolding against one of the most difficult periods in its relations with India.
Since Sheikh Hasina was ousted in August 2024 and sought refuge in India, ties have been strained by Dhaka’s demand for her extradition and its growing engagement with China and Pakistan.
Yet the energy crisis is forcing the two neighbours to confront a basic reality: Bangladesh remains heavily dependent on India for electricity and fuel.
The crisis is no longer simply about keeping the lights on. Gas shortages, fuel constraints, technical failures and financial stress are disrupting industry, raising costs and threatening exports.
The shortages have also disrupted commercial life, with authorities ordering shops, malls and markets to close by 8pm in an effort to conserve electricity.
The immediate problem is not a lack of generating capacity. Bangladesh has installed capacity of roughly 29,000 megawatts, well above normal demand. Yet Prothom Alo reported in August that generation at 62 of the country’s 137 power plants had been disrupted, with 20 completely shut down. At one point, load-shedding exceeded 3,700 megawatts.
Fuel is the principal constraint. More than 43 per cent of Bangladesh’s electricity comes from gas-fired plants, while domestic gas production is declining.
Liquefied natural gas (LNG) supplied about 25 per cent of the country’s gas in FY2025, up from 7.3 per cent in FY2020, according to The Financial Express.
A fire at an LNG terminal at Maheshkhali on July 21 further reduced supplies. Coal shortages and technical problems at coal-fired plants added to the pressure.
The sector also faces a financial problem. Bangladesh has expanded generation through independent power producers while making capacity payments even when plants are not generating electricity.
This contributes to losses at the Bangladesh Power Development Board, while transmission and distribution losses of about 12 per cent further weaken the system. The consequences are spreading across the economy.
Bangladesh’s garment industry is particularly vulnerable because production delays can quickly become missed export deadlines. The Bangladesh Knitwear Manufacturers and Exporters Association said factories were operating at only 50-60 per cent of capacity in April, with production costs up at least 20 per cent.
Load-shedding has forced manufacturers to use diesel generators, while delayed shipments have brought additional air-freight and discounting costs.
The pharmaceutical industry is also exposed. The Bangladesh Association of Pharmaceutical Industries (BAPI) has warned that manufacturers increasingly depend on generators and uninterrupted power systems because production cannot simply stop during outages. Higher energy costs could eventually affect medicine prices.
Agriculture is similarly vulnerable, with farmers switching from electric to diesel irrigation during shortages, raising production costs.
Dhaka is pursuing several responses: more domestic gas exploration, greater use of renewable energy, improved transmission and distribution, and additional energy imports.
Each has limitations. Domestic gas exploration takes time; imported LNG remains exposed to global prices and supply disruptions; and renewable projects require financing, grid connections and policy stability.
Renewables are also becoming an area of growing Chinese influence. Bangladesh aims to develop up to 10,000 megawatts of solar capacity by 2030, according to Energy Tracker Asia.
Chinese companies and financial institutions are already involved in solar, wind and grid projects, while Chinese firms dominate significant parts of the solar equipment supply chain.
More than half of foreign direct investment in Bangladesh’s renewable-energy sector is from China.
But that is largely a medium-term proposition. Financing constraints and difficulties making renewable projects commercially viable remain obstacles to rapid expansion.
India, by contrast, is already embedded in Bangladesh’s energy system. Dhaka has agreements to import up to 2,656 megawatts of electricity from India, providing an important source of supply when domestic generation falls short.
India also supplies 180,000 tonnes of diesel annually through the Friendship Pipeline under a 15-year deal. In August, Dhaka sought increased supply to help tide over the crisis.
Yet energy cooperation has become politically sensitive. Bangladesh objected to an Indian Settlement Nodal Agency charge on cross-border electricity transactions, initially proposed at 0.01 Indian rupees per unit and later reduced to 0.005 rupees. The charge is separate from the electricity tariff and covers functions such as scheduling, metering and settlement.
The dispute looks particularly awkward alongside Bangladesh’s proposed Chinese waste-to-energy project at Aminbazar. Reports said the 42-megawatt project would supply electricity at Tk25 per unit—about 127 per cent above the roughly Tk11 per unit Bangladesh paid for Indian electricity in FY2025-26.
The comparison is not entirely like-for-like because the Chinese project also involves waste management and is far smaller than Bangladesh’s Indian imports. But it highlights the political sensitivity surrounding energy costs.
China offers capital, technology and an expanding role in renewable energy. India offers proximity, existing electricity interconnections and established fuel infrastructure. Dhaka needs both, but neither can resolve its underlying structural weaknesses.
For New Delhi, the crisis offers a chance to demonstrate the practical value of energy interdependence without turning it into political leverage. For Dhaka, the priority is to use that interdependence while diversifying its energy sources.