Bangladesh’s Energy Shock: Why India Matters In South Asia’s Fuel Trade

Bangladesh is turning to India for diesel supplies as a continuing natural gas shortage puts pressure on the country’s power sector. The crisis has also prompted authorities to order shopping malls, shops and other commercial establishments to shut by 8 pm.

The measures come as Bangladesh struggles to maintain electricity generation amid reduced gas availability. The wider energy crunch has been aggravated by disruptions linked to the ongoing US-Iran conflict, which have added pressure to fuel supplies and prices.

The energy crisis has also led to increased engagement between India and Bangladesh. On August 6, Indian High Commissioner to Bangladesh met Bangladesh’s Power, Energy and Mineral Resources Minister Iqbal Hassan Mahmood to discuss cooperation in the power and energy sectors.

According to the Indian High Commission in Dhaka, the discussion focused on the importance of cross-border power and energy connectivity as a key pillar of the India-Bangladesh economic partnership.

Indian High Commissioner also met Bangladesh Prime Minister Tarique Rahman on August 10. The Indian High Commission said the two sides exchanged views on matters of mutual interest and discussed ways to strengthen bilateral relations with a people-centric approach.

Why Is Bangladesh Facing A Power Crisis?

The Dhaka Tribune reported that Bangladesh’s electricity crisis stems from a fuel shortage. Gas supplies were severely disrupted following problems at the LNG terminal in Moheshkhali after July 21.

Gas-fired power plants require around 2,524 million cubic feet of gas a day, but received only 744 million cubic feet on Tuesday. At the same time, peak electricity demand stood at 18,975MW, while only 15,833MW could be supplied, leaving a shortfall of 3,142MW.

The resulting shortage has caused load-shedding across Bangladesh, affecting both rural and urban areas.

The immediate gas problem was linked to a sharp decline in regasified liquefied natural gas (RLNG) supplies from the Moheshkhali LNG terminals in Cox’s Bazar.

According to BD News, Bangladesh experienced a reduction of around 450 million cubic feet per day (MMcfd) of RLNG because of a technical glitch.

The company involved did not specify when normal supply would resume. It also did not clarify the nature of the technical problem, which terminal was affected or when the disruption began. The reduced RLNG supply also resulted in low gas pressure for users of the Titas Gas distribution network.

Why Is Bangladesh Seeking Diesel From India?

Bangladesh imports nearly 95% of its energy needs and relies heavily on supplies from the Middle East. The current disruption has already contributed to panic buying, temporary rationing at fuel stations and higher spot-market prices for LNG and other fuels.

To maintain fuel stocks for about a month, Bangladesh has secured alternative diesel supplies from countries including China and India, while also seeking international financing to cushion the impact of the energy shock.

India’s role is particularly significant because of its existing energy links with Bangladesh. The two countries already cooperate in cross-border electricity and energy connectivity, while the India-Bangladesh Friendship Pipeline provides a route for petroleum supplies.

The current crisis has therefore highlighted the importance of these existing links as Bangladesh seeks to manage shortages and maintain energy supplies.

Asia’s Energy Vulnerability Amid Conflict

According to Wood Mackenzie, Asia’s dependence on Middle Eastern oil is a long-established structural reality. Before the conflict, around 80% of the crude passing through the Strait of Hormuz was delivered to Asian refineries.

Japan and South Korea sourced more than 90% and 70%, respectively, of their oil imports from the Gulf before the outbreak of the war. China and India, the world’s two largest oil importers, have diversified supplies to include Russia and the US but still depend on the Middle East for around half their crude supplies.

Developing economies across Southeast and South Asia are particularly vulnerable because economic growth in many of these countries depends on manufacturing and exports. Most also have limited foreign-currency reserves to pay for higher oil import bills.

Wood Mackenzie said that in 2026, the “war premium” was no longer a theoretical risk and would place significant pressure on national balance sheets.

India's Growing Energy Role In The Region

A May 2026 NIICE research paper, “Energy Insecurity in South Asia and India’s Evolving Regional Role,” says India is emerging as a key energy hub in South Asia, driven by its refining capacity, geographic position and growing regional connectivity.

India’s role is particularly significant for neighbouring economies. Nepal sources nearly 100% of its petroleum imports through Indian supply chains, while India supplies around 70–80% of Bhutan’s petroleum products.

Bangladesh gets 10–15% of its energy imports from India, particularly refined petroleum and cross-border electricity. Sri Lanka has also relied on India for a significant share of its fuel during periods of crisis, while the Maldives sources a substantial portion of its petroleum products from India.

NIICE argues that the ongoing energy crisis and volatility in global supply chains provide India with an opportunity to strengthen its regional role as a reliable energy partner.

It identifies four key areas, crisis response, regional energy integration, clean-energy cooperation and infrastructure connectivity. India’s assistance to Sri Lanka during its 2022 economic crisis, including fuel supplies and credit support, is cited as an example of crisis response. Expanding electricity trade with Bangladesh, Nepal and Bhutan could further deepen regional integration.

It also highlights opportunities for India to invest in solar, hydropower and grid infrastructure, while projects such as the India-Bangladesh Friendship Pipeline demonstrate how physical connectivity can support energy security.

The reserach paper argues that transparent, affordable and demand-driven cooperation could strengthen regional energy security while building trust and greater interdependence across South Asia.