Bangladesh Must Regulate Before It Privatises Power

On 22 July 2026, Bangladesh's power minister, Iqbal Hasan Mahmood, said the government wanted private participation in consumer-level electricity distribution. Private operators, he argued, could improve bill collection, accountability and service quality. Proposals had been invited from interested companies. The stated direction was towards distribution, not the sale of the entire power system.[1]

The proposal deserves consideration. Bangladesh's energy system needs investment, more reliable service and greater financial discipline. The World Bank's October 2026 assessment again identified weaknesses in the energy sector as a constraint on economic recovery and private investment.[2] But a serious problem does not make every proposed remedy a good one. Before asking who should own or operate distribution companies, Bangladesh needs to ask a more basic question: who will regulate them, and can that institution say no to both ministers and powerful investors?

Sources and notes:

[1] Bangladesh Sangbad Sangstha. “Plan to privatise power distribution to improve accountability, service: Minister”, 22 July 2026. Describes the government’s stated proposal as consumer-level electricity distribution. Read source

[2] World Bank. “Bangladesh Needs Urgent Financial, Energy, and Revenue Reforms to Restore Growth, Create Jobs”, 6 October 2026. Read source

[3] Dhaka Tribune. “Public hearing must for gas, electricity prices”, 27 August 2024. Explains the amendment restoring BERC’s tariff-setting role. Read source

[4] Bangladesh Sangbad Sangstha. “BERC adjusts electricity price upward to reduce subsidy”, 3 June 2026. Reports tariff decisions and public hearings. Read source

[5] The Daily Star. “BERC withdraws electricity price hike for low-use residential consumers”, 4 June 2026. Read source

[6] Kirkpatrick, Parker and Zhang. “Competition, regulation and privatisation of electricity generation in Developing Countries: does the sequencing of the reforms matter?”, working paper, 2004; summarised by the UK Foreign, Commonwealth & Development Office. Read source

[7] World Bank. Mumba Ngulube, “How solid are regulatory frameworks for the power sector in developing countries?”, 6 February 2023. Read source

[8] Ofgem. “About us”, UK regulator’s account of the economic regulation of energy networks. Read source

[9] World Bank Independent Evaluation Group. “The World Bank Group’s Support for Transformation of the Energy Sector”, Ghana evaluation covering fiscal years 2013–23, Chapter 4. Read source

[10] World Bank. “Resilience through Reforms: Nigeria Development Update”, June 2021, Spotlight 1, pp. 51–53. Read source

[11] Nigerian Electricity Regulatory Commission. “Annual Report 2024”, published July 2025, pp. 170–171, including 2024 distribution losses and regulatory targets. Read source

[12] Pakistan Institute of Development Economics. “Privatisation of Electricity Distribution Companies: A Way Forward?”, analysis of K-Electric and wider reform options. Read source

[13] Electricity Regulatory Authority, Uganda. “Government of Uganda Takes Over Electricity Distribution”, 31 March 2025. Read source

[14] Centre for Energy Research (Bangladesh). “Power Sector of Bangladesh in 2025–26”, 24 September 2026. Sector report on capacity, utilisation and fuel supply. Read source

[15] World Bank (2019). Rethinking Power Sector Reform in the Developing World. A cross-country review of the performance of ownership and regulatory models. Read source

[16] Bangladesh Energy Regulatory Commission. “Functions of BERC”, official summary of licensing, tariff, accounting, standards and consumer-dispute functions. Read source

[17] Ofgem. “Energy network price controls”, overview of output-linked price regulation and monopoly network incentives. Read source

[18] Gassner, K., Popov, A. and Pushak, N. (2009). Does Private Sector Participation Improve Performance in Electricity and Water Distribution? World Bank. Read source

Editorial note: The proposed sequencing, performance gates and consumer safeguards are recommendations for consideration. Existing statutory powers are not assumed to guarantee effective enforcement, and proposed pilot durations are illustrative rather than existing government commitments.

A private monopoly is still a monopoly

Privatisation is sometimes presented as though a change of ownership automatically brings competition. That may be possible in some parts of the electricity industry, especially generation and retail supply where market structures permit it. The local distribution network is different. It rarely makes economic sense to build rival sets of poles, cables and transformers to reach the same street. Most consumers remain dependent on one network operator, whether that operator is publicly or privately owned.

This distinction is fundamental. A privately operated distribution company can invest in smart meters, reduce commercial losses, improve maintenance and pursue unpaid bills more consistently. It can also delay less profitable connections, underinvest in infrastructure, press for tariff increases or favour short-term returns unless its obligations are clearly defined and enforced. The question is not whether private managers have an incentive to make money. Of course they do. The question is whether the regulatory system ensures that making money depends on providing a good service at a fair and justified cost.

That requires more than a licence issued by a ministry. The regulator must decide what revenues an operator can reasonably recover, which losses consumers should not pay for, what investment must be delivered and how consistently the company meets service standards. It must be able to demand information, inspect accounts, resolve disputes, impose penalties and, in extreme cases, recommend or order a change of operator. Otherwise, privatisation simply exchanges a politically influenced public monopoly for a politically connected private one.

What other countries actually teach us

It is tempting to divide international experience into countries where privatisation succeeded because corruption was absent and countries where it failed because corruption was widespread. The reality is less tidy. No country has eliminated corruption or political pressure entirely, and ownership changes interact with fuel costs, contractual design, investment needs, social tariffs and the wider economy. Nevertheless, the evidence is strongly in favour of building credible institutions before transferring long-term monopoly rights.

An econometric study of electricity reform in 25 developing countries found that establishing independent regulation and introducing competition before privatisation were associated with better performance in important measures of electricity generation.[6] The study concerned generation, not a guarantee of success in distribution, but its message about sequencing is relevant. A separate World Bank review of regulatory frameworks warns that laws can look impressive on paper while independence and enforcement remain weak in practice.[7]

Britain offers one institutional lesson, though not a model of perfection. Its private electricity network companies operate under economic regulation by Ofgem, which sets price controls and oversees monopoly networks.[8] British households still face difficult questions about energy bills, investment and consumer protection. What matters for Bangladesh is not that British privatisation ended controversy. It is that the monopoly character of electricity networks was recognised as a permanent reason for regulation, not as a temporary inconvenience on the way to a free market.

Ghana supplies a warning about governance and transaction design. A private concession for electricity distribution began in 2019 but ended only months later. The World Bank's independent evaluation links the episode to political interference in the concession's shareholder arrangements and identifies wider failures in energy-sector governance.[9] The lesson is not that all private concessions are unworkable. It is that a promising contract cannot survive indefinitely when the institutions and decisions around it lack credibility.

Nigeria offers a particularly relevant caution because it established an electricity regulator before handing distribution companies to private investors in 2013. Yet the World Bank concluded in 2021 that the reform had not delivered the expected improvements in performance and service, pointing to inconsistent tariff policy, delayed enforcement of obligations and uncertainty about investment and loss-reduction commitments.[10] The sector's commercial weaknesses remained serious a decade later: Nigeria's regulator reported aggregate technical, commercial and collection losses of 37.95 per cent in 2024, against a regulatory target of 24.73 per cent.[11] This is not proof that private ownership can never work, or that the regulator achieved nothing. It shows that establishing a commission and signing performance agreements mean little without consistent policy, enforceable obligations and the institutional capacity to hold investors to account.

Pakistan's experience with K-Electric is more mixed than the simple labels 'success' and 'failure' suggest. Privatisation was followed by management changes and some operational improvements, but concerns over service reliability, tariffs, losses and governance persisted. Research from the Pakistan Institute of Development Economics describes continuing difficulties and the importance of the process by which the operator was chosen.[12] The ownership transfer did not make the public interest self-enforcing.

Uganda demonstrates the need to judge a concession by measurable results and its full lifetime. During Umeme's approximately 20-year distribution concession, the regulator reports that distribution losses fell from 33 per cent in 2005 to 16 per cent in 2024 and customer numbers grew substantially. Yet the government allowed the concession to end and returned operations to a state company in March 2025, amid a different judgement about cost and future control.[13] Operational gains can be real without settling every question of value for money or public accountability.

These cases do not establish that private ownership is good or bad in itself. They establish something more useful: the contract, the regulator, the procurement process and the public institutions around the operator matter at least as much as the identity of the shareholder.

This is consistent with the World Bank’s wider review of power-sector reform: private participation in distribution has often been limited, and well-governed public utilities can achieve efficiencies comparable with private ones. The policy choice should therefore be driven by service outcomes, not an assumption that an ownership change is itself the reform.[15]

The costs that privatisation cannot make disappear

Bangladesh also needs to avoid asking distribution reform to repair problems that arise elsewhere in the electricity system. A distribution company can reduce theft and collection losses. It cannot make an expensive generation contract cheap or create fuel that is not available. The country's power system has been burdened by the costs of fuel imports, underused capacity and contractual payments. A September 2026 sector review reported unused generating capacity alongside localised load-shedding partly linked to fuel shortages.[14]

This creates an uncomfortable possibility. A private distributor might become very effective at collecting higher tariffs from consumers while the underlying costs of electricity remain inflated by decisions made upstream. The public could then face stricter billing and disconnection practices without receiving the efficiency gains it was promised. Unless power-purchase agreements, wholesale costs, subsidies and the allocation of risk are examined at the same time, the reform could be financially tidy for one company and deeply unsatisfactory for the country.

There is also a geographical question. Profitable urban service areas are likely to be more attractive to investors than sparsely settled rural ones. An operator may have little commercial reason to connect poorer households or maintain costly rural lines unless the contract pays for and requires it. Equal access cannot be left as a hope after the concession is signed. It must be an enforceable condition of participation.

From diagnosis to delivery: eight policy moves

Bangladesh does not need to wait for perfect politics or a corruption-free administration. It does need a testable set of safeguards before granting private operators control over an essential network. The following steps are policy proposals, not a description of measures the government has already adopted. They draw on the international experience above and on BERC’s existing statutory functions.[15][16]

1. Publish an independently verified distribution baseline
Before selecting operators or valuing assets, commission an independent audit for each distribution area. It should reconcile at least three years of accounts, subsidies, arrears, procurement liabilities and network investment; map asset condition and maintenance needs; and verify technical and commercial losses. The same exercise should publish customer-level indicators for outage frequency and duration, connection waiting times, billing errors and complaint resolution. Data should distinguish urban, rural and low-income service areas. Where evidence is missing, government should say so and fund its collection. Without an agreed starting point, a bidder can claim credit for improvements that were already under way, while the public cannot identify deterioration.

2. Test and strengthen BERC before the handover
Commission an independent review of BERC’s legal powers and practical independence, then close the gaps before award. Publish merit-based appointment criteria, fixed-term safeguards, conflict-of-interest rules, transparent funding and clear grounds for removing commissioners. BERC should set and publicly explain tariff methodologies, efficient loss allowances, service standards, investment obligations and complaint remedies; it must have the staff, information rights and enforceable sanctions to apply them. Government can set social-policy objectives, but any direction affecting tariffs or a particular licensee should have a lawful basis, a written public explanation and identified funding. The capacity test is whether BERC can enforce an unpopular decision against both a state company and a private investor.[16]

3. Separate distribution efficiency from upstream power costs
Publish a parallel review of generation payments, power-purchase agreements, wholesale prices, fuel-related liabilities and budget subsidies. A new distributor should be responsible for losses and service failures it can control, not for generation contracts it did not negotiate. Conversely, an operator should not be rewarded for collecting higher charges that merely pass through inefficient upstream costs. Establish a transparent cost-allocation and subsidy framework so the public can see which expenses are borne by taxpayers, consumers and investors. This review must inform the tariff model before procurement, rather than being left for renegotiation after the deal is signed.

4. Compare ownership and management options on equal terms
Prepare a published options appraisal covering improved public management, a time-limited performance-based management contract, a concession over publicly owned assets and any proposed asset sale. For each option, assess financing costs, retained public liabilities, investment obligations, reversibility, tariff exposure and treatment of existing staff. A concession is not an asset sale, and a management contract does not require the same transfer of risk. Decisions should be based on independently assessed value for money, service quality and affordability, with no presumption that the bidder offering the largest upfront payment offers the best outcome. The World Bank’s cross-country analysis cautions against assuming that one ownership model is universally superior.[15][18]

5. Make procurement resistant to political capture
Use an open, competitive and independently overseen tender, with pre-published evaluation criteria. Require disclosure of ultimate beneficial owners, relevant political connections, financing arrangements, past utility performance and conflicts among bidders, advisers, officials and regulators. Publish the concession or management contract, subject only to narrowly justified redactions, together with government guarantees, compensation clauses and estimated contingent liabilities. An independent audit function should review the valuation and award process. Procurement rules must make it possible to exclude conflicted bidders and challenge irregular awards before a long-term monopoly right becomes difficult to reverse.

6. Legislate or license consumer protections before any transfer
BERC and government should agree an enforceable consumer charter before signing contracts. It should cover a clearly funded lifeline or targeted affordability scheme, accessible payment arrangements, limits on arbitrary disconnection, independent complaint review, compensation for serious service failures and prompt correction of billing errors. Rural extension and low-income connections need measurable obligations and transparent financing, not goodwill clauses. Safeguards must also protect consumers who lack digital access or formal tenancy documentation. These commitments should appear in licences, contracts and public tariff decisions so that an operator cannot treat them as optional corporate social responsibility.

7. Pay for verified service outcomes, not promises
Require each operator to submit a regulator-approved investment and maintenance plan, then publish a yearly performance scorecard. Comparable measures should include interruptions per customer, hours without supply, technical and collection losses, metering accuracy, new connection times, complaint handling, safety, capital expenditure delivered and service to underserved areas. BERC should approve targets against verified local baselines, rather than apply invented nationwide percentages. Allowable returns and penalties should be linked to performance, with audited reporting, independent inspections, escalating corrective orders and, in serious cases, security enforcement, step-in rights or termination. Britain’s price-control approach shows how financial incentives can be tied to outputs for monopoly networks, although its detailed model cannot simply be copied.[17]

8. Start with a reversible pilot and an independent decision gate
Do not transfer all distribution areas simultaneously. Select a limited, openly tendered trial with a defined term and arrangements for service continuity if it fails. Compare its results with a credible programme of reform in at least one broadly comparable publicly managed area; adjust for differences in geography, customer density and starting network conditions. Publish six-monthly results and commission an independent review after a meaningful operating period, preferably at least two years. Wider implementation should require demonstrable improvements in reliability, loss reduction, affordability, customer treatment and investment delivery. Failure should trigger a revised design or better public management, not an automatic extension of the contract.

→ All Topics

Corruption does not have to reach zero. Tolerance for it does.

It would be unrealistic to demand a country with no corruption and no political influence before beginning any reform. No government can certify such conditions, and waiting for perfection would become another excuse to do nothing. What Bangladesh can insist upon is a credible system that makes corrupt decisions harder to take, easier to detect and costly to conceal.

That means competitive tendering rather than privileged negotiation, beneficial-ownership disclosure rather than anonymous investors, public tariffs rather than unexplained adjustments, independent audits rather than assurances, and enforceable contract terms rather than political relationships. It means appointing regulators who can survive telling a minister or influential business group that its preferred decision is unlawful or unjustified.

The test is not whether politicians promise to keep their hands off regulation. It is whether the rules still work when a politician, a powerful company or a well-connected intermediary tries to interfere. That is the level of institutional confidence that should precede any long-term transfer of a public utility monopoly.

The decision should follow the evidence

Bangladesh should neither reject private investment on ideological grounds nor embrace privatisation as a shortcut around governance reform. Private operators may bring finance, better metering, stronger maintenance and customer-service expertise. Yet each possible benefit depends on a contract the country can afford, a regulator that can enforce it and public information that allows the results to be judged. A well-run public distributor remains a legitimate comparator, not a failure to reform.

The sequence is the policy. First establish what each network costs and how it performs. Then prove that BERC can regulate tariffs, investment and customer protection without political or commercial instructions. Only after a transparent appraisal and competitive process should a limited private arrangement be tested. Nationwide commitments would follow the evidence, not a ministerial announcement or a preferred investor’s timetable.

Electricity is too important to treat privatisation as a statement of political philosophy. The measure of success is not how many companies disappear from the government’s balance sheet. It is whether homes and businesses receive more reliable power at a defensible cost, whether remote communities are served and whether anyone responsible for failure can be held to account.

Bangladesh may be ready to invite private expertise into its power system. It should not invite private monopoly power until the institutions defending the public interest have shown that they can work.

The policy proposition

• Make demonstrable regulatory independence and enforcement capacity a condition of any long-term electricity distribution transfer.

• Publish independently verified accounts, network conditions, service standards and upstream electricity costs before inviting binding bids.

• Compare public-sector reform, management contracts and concessions rather than treating outright privatisation as the starting assumption.

• Put affordable essential supply, rural connections, transparent tariffs and consumer redress into enforceable licence and contract conditions.

• Test a limited, competitively procured model first; expand only after independently verified improvements in service and value for money.

A government can transfer the management of an electricity network to a private company. It cannot transfer away its responsibility when households cannot afford the bill, factories lose power or a neighbourhood waits months for a connection. That responsibility remains public, whatever the ownership of the wires.

Bangladesh has a regulator. Does it have regulatory independence?

Bangladesh is not starting from zero. The Bangladesh Energy Regulatory Commission (BERC) has existed for more than two decades and possesses statutory responsibilities over tariffs and energy regulation. In August 2024, the government restored its central tariff-setting role by removing the provision that had allowed energy prices to be adjusted by executive order without the normal hearing process.[3] That was a meaningful institutional correction. It should not be confused with proof that the regulator is already equipped to supervise a new class of privately operated distribution monopolies.

June 2026 illustrates both the importance and the sensitivity of this work. BERC announced increases to wholesale and retail electricity tariffs after public hearings.[4] Following concerns over the effect on poorer consumers, it reversed the increases for the lowest residential consumption bands.[5] Protecting vulnerable households is a legitimate public policy objective. Equally, the episode shows why the relationship between ministers, the regulator and licensed companies needs to be transparent. When government asks for a decision to be reconsidered, the legal basis, evidence, cost and final reasoning should be clear to the public.

Independence does not mean that an unelected commission should decide the country's social or energy policy. Parliament and government should set lawful public objectives, including affordability, security of supply and decarbonisation. BERC should then apply published rules to individual operators without being directed towards a preferred commercial outcome. Its commissioners should be appointed through an open, merit-based process, protected by defined terms, supported by skilled staff and financed through arrangements that cannot easily be used to punish an unwelcome decision.

Nor does independence mean immunity from scrutiny. Reasoned decisions, open hearings, audited accounts, conflict-of-interest declarations, judicial review and parliamentary oversight are what make regulatory power legitimate. Bangladesh needs a regulator that is independent enough to resist interference and accountable enough to deserve that independence.

BERC already lists licensing, tariff determination, uniform accounts, service standards, publication of sector statistics and consumer dispute resolution among its functions.[16] The reform task is therefore not simply to confer powers on paper. It is to establish whether those powers can be exercised consistently against public companies and politically connected private operators, with the staffing, evidence and legal backing to make decisions stick.

Murshed Ahmed is a Senior Urban Planner based in the UK and Chartered Member of the Royal Town Planning Institute.

Tarek Aziz is a Research Fellow at Policy Outlook, based in the UK.