A committee is set to recommend excluding workers’ welfare allocations from labour laws and regulations in the draft Production Sharing Contract (PSC). According to relevant sources, the committee formed by the Ministry of Power, Energy and Mineral Resources to review the PSC is likely to recommend not including the Workers’ Profit Participation Fund (WPPF) for workers.
Workers and all other stakeholders have demanded respect for the country’s existing laws. They have stated that taking such a decision without consultation with the Ministry of Labour and without tripartite dialogue would constitute a violation of workers’ rights.
In Bangladesh, the Workers’ Profit Participation Fund (WPPF) was established by law in 2006. Under this law, every company is required to deposit a portion of its profits into the fund for workers’ welfare. Due to this mandatory provision, both local and multinational companies deposit a specified portion of their profits into the fund every year. The money is used to improve workers’ living standards. Experts believe that all companies should comply with this law to protect workers’ interests. Following the advice of the International Labour Organization (ILO), Bangladesh—along with countries such as Pakistan—has made this fund mandatory through legislation.
The WPPF does not depend on investment, revenue, or cost recovery. It becomes applicable only when a company declares net profit.
It has been learned that, in order to sign contracts with foreign companies for offshore gas exploration, discussions are underway to amend labour laws and regulations to exempt this sector from the WPPF in the draft PSC recently prepared by the government.
To review the draft contract with foreign companies for offshore oil and gas exploration, the Energy and Mineral Resources Division has formed a committee. The chairman of Bangladesh Gas Fields Company Limited heads this committee. Energy experts and officials from Petrobangla are also members. The committee is expected to submit its report by January 15. It is known that the committee has already held several meetings and discussed various issues.
One of the committee members, Professor Dr. M. Tamim, Vice Chancellor of Independent University, Bangladesh (IUB), told Energy Bangla that they are trying to submit the report by January 15. He said whether the WPPF will be included in the PSC is entirely a matter for the National Board of Revenue (NBR), as there is a legal obligation involved. He also mentioned that discussions are ongoing as to whether the committee will recommend granting this exemption to foreign companies. The final decision has not yet been made. He noted that there is a rule requiring 5 percent of profits to be contributed to the WPPF.
Through this fund, the state receives regular and significant revenue on the one hand, while on the other hand ensuring workers’ welfare, equitable distribution of resources, and social stability.
Experts say that Bangladesh’s draft PSC meets international standards and already offers sufficient incentives to foreign companies. There is no need to remove workers’ benefits from it.
Babul Akter, General Secretary of the Bangladesh Trade Union Confederation, told Energy Bangla that this is a workers’ right. If this benefit is removed by ignoring the country’s laws, it would be against workers’ interests. Stating that it has no connection with investment, he said that many multinational companies operate in the country and all of them provide profit shares to workers in accordance with the law. Granting exemptions to one or two companies or to a specific sector would require extending the same benefit to all, which would reduce government revenue. A large section of workers would be deprived of their rights, and it would damage the country’s international reputation, he added.
Among the incentives proposed for foreign companies in the draft PSC are exemptions from corporate tax and import duties.
Investment-Friendly PSC Structure:
Full cost recovery: Contractors can recover all exploration, development, and operational costs related to gas production from the initial production phase.
Tax benefits: Corporate income tax of contractors is paid by the government. No other corporate entity enjoys this benefit.
Duty- and tax-free imports: All machinery, equipment, and materials used in petroleum operations can be imported duty- and tax-free, reducing initial capital expenditure.
Sources in the energy division have stated that the WPPF is not a PSC issue; it is an existing law of the country, and PSCs will be executed in compliance with the law.
Despite winning maritime boundary disputes in 2012, Bangladesh has not yet been able to begin offshore oil and gas exploration. Domestic indecision and various international events are responsible for this delay.
Experts note that although global energy prices were low during the COVID-19 period, investment remained stagnant. After the pandemic, rising global energy prices failed to attract international oil and gas companies. Previously, seven companies had purchased bid documents, but none submitted bids.
Most multinational companies operating in Bangladesh comply with WPPF provisions. However, some institutions have attempted to evade the law and transfer their entire profits abroad, depriving the government of legitimate revenue and workers of their rightful benefits.
The Real Reasons for IOC Disinterest Are Geological and Commercial:
Industry analysis shows that international oil companies’ (IOCs) lack of interest in Bangladesh’s offshore blocks is not related to the WPPF.
Geological risk and limited data: Bangladesh’s offshore area remains a frontier basin with limited modern seismic data. Two-dimensional and three-dimensional seismic surveys are extremely expensive, reducing interest in high-risk investments. Government-sponsored multi-client seismic initiatives are therefore crucial and timely.
Global capital competition: IOCs choose regions with proven reserves, lower risk, or very high return potential due to limited capital availability. Bangladesh must compete in this global market.
Risk–return balance: Although positive reforms such as linking gas prices to Brent crude have been introduced in the PSC, some investors may still perceive lower risk-adjusted returns compared to other regions.
The primary reason for the lack of foreign companies in offshore gas exploration is not the obligation to share profits for workers’ welfare. This is a post-profit, socially responsible mechanism that ensures national revenue, workers’ welfare, and economic inclusion without imposing additional burdens on investment or operations.
The real challenges are the inherently high risks of offshore exploration, global capital competition, and the lack of adequate data.
Under the WPPF, 10 percent of the fund must be allocated to the government’s Workers’ Welfare Fund, strengthening national social safety systems. Another 10 percent goes to the Employees’ Welfare Fund, helping motivate workers and maintain industrial peace. The remaining 80 percent is distributed among employees, of which 30 percent is collected as income tax and deposited directly into the state treasury.
According to International Labour Organization (ILO) conventions, Bangladesh is obligated to protect various workers’ rights. It was under this obligation that the government enacted labour laws and established the WPPF. Withdrawing from this framework could expose the country to criticism from international human rights organizations, observers warn.
To ensure the welfare of workers in both formal and informal sectors, the Bangladesh Workers’ Welfare Foundation Act, 2006 (Act No. 25 of 2006) was enacted and came into effect on October 1, 2006. This law is a modern version of the Companies’ Profit (Workers’ Participation) Act of 1968. However, due to the absence of specific procedures and enforcement mechanisms, the law has not been fully implemented in practice.