Bangladesh has decided to halve its power purchases from India’s Adani Power, citing a drop in demand during the winter months. This decision comes amidst a backdrop of financial disagreements, with outstanding dues between the two parties reportedly amounting to hundreds of millions of dollars.
Background of the Supply Agreement
Adani Power, led by its controversial founder accused of involvement in a bribery scheme—a claim he denies—previously reduced its power supply to Bangladesh on October 31. This reduction was initiated due to payment delays, exacerbated by Bangladesh’s ongoing foreign exchange crisis. Under a 25-year contract established in 2017 during the tenure of former Prime Minister Sheikh Hasina, Adani has been supplying electricity from a $2 billion power plant located in Jharkhand, India. The facility consists of two units, each with a generation capacity of about 800 megawatts (MW).
The Recent Developments
Following Adani’s supply cut, the Bangladesh government directed the company to provide only half of the previously agreed power output, as winter demand had significantly decreased. Mohammed Rezaul Karim, chairperson of the Bangladesh Power Development Board (BPDB), expressed frustration at the abrupt reduction of supply and indicated that there was no need to operate both units of the plant at this time.Â
Documents reviewed by Reuters revealed that the power plant operated at a mere 41.82% capacity in November, with one unit shut down since November 1. The Bangladesh government had previously relied on approximately 1,000 MW of power from Adani during the previous winter.
Ongoing Payment Disputes
The issue of unpaid dues has created tension between Bangladesh and Adani. Karim noted that Bangladesh owes Adani around $650 million, with recent payments of $85 million in November and $97 million in October. However, an unnamed source from Adani Power suggested that the total dues could be as high as $900 million, complicating the financial landscape for the company and impacting its borrowing capacity.
In light of these disputes, Bangladesh is reportedly seeking to reduce the prices stipulated in the agreement with Adani unless the contract is nullified by a court investigation into its terms. The Adani spokesperson stated that the company remains in close communication with Bangladesh’s officials and is hopeful that the outstanding payments will be settled soon.
Pricing Concerns
Adani Power has been criticized for its pricing structure, which is reportedly the highest among Indian suppliers to Bangladesh. In the fiscal year ending June 30, 2024, Adani’s electricity pricing was 14.87 taka per unit, significantly higher than the average price of 9.57 taka charged by other Indian suppliers. This discrepancy has led to substantial subsidies from the Bangladeshi government to maintain affordable retail prices for consumers, which currently stand at 8.95 taka per unit.
Muhammad Fouzul Kabir Khan, an adviser on power and energy in Bangladesh, emphasized the need for overall reductions in power prices, not only from Adani but across the board, to alleviate the financial burden on the government and consumers alike.
Conclusion
The ongoing dispute over power purchases from Adani Power highlights the complexities of energy procurement and financial management in Bangladesh. As negotiations continue, the future of the power supply agreement remains uncertain, raising critical questions about energy security and pricing strategies for the country. With both parties under pressure, the resolution of these issues will be crucial for maintaining a stable energy supply in Bangladesh.
