Bangladesh Seeks Renegotiation of Adani Power Deal

In recent developments, Bangladesh has expressed its intention to renegotiate a power purchase agreement with India’s Adani Group, a company currently embroiled in controversy. The deal, which spans 25 years, has come under scrutiny following allegations of corruption against Adani Group founder Gautam Adani. These allegations include claims of involvement in a $265 million bribery scheme in India, which Adani has denied. As the situation unfolds, the Bangladeshi government is keen on ensuring that the terms of the agreement are fair and beneficial for its citizens.

The power purchase agreement in question was signed in 2017, during the tenure of Prime Minister Sheikh Hasina, who has since faced accusations of corruption and was ousted amid public unrest. Under this deal, Adani supplies electricity from a $2 billion coal-fired power plant located in eastern India. This plant, with a capacity of 1,600 megawatts, began supplying power to Bangladesh last year, contributing to about 10% of the country’s energy consumption. However, the high cost of electricity from this source has raised concerns among Bangladeshi officials.

Bangladesh’s de facto energy minister, Muhammad Fouzul Kabir Khan, stated that the government is looking to lower the prices under the current agreement unless a court cancels it. The High Court of Bangladesh has ordered an investigation into the contract, which is expected to conclude by February. Khan emphasized the need for renegotiation in case of any anomalies found in the contract, while also highlighting that cancellation would only be considered if there are clear irregularities such as corruption or bribery.

As part of the ongoing investigation, a committee of experts has been tasked with examining the contract. Some issues have already been identified, including the fact that Bangladesh has not benefited from certain Indian tax exemptions related to the power plant. This could serve as a basis for renegotiating the deal. Despite the ongoing controversies, Adani Power Ltd has claimed that the plant will provide Bangladesh with reliable and affordable electricity, significantly reducing costs for consumers.

However, the pricing structure remains a significant concern. In the fiscal year 2022/23, Adani charged Bangladesh 14.02 taka per unit for electricity, which is considerably higher than the average price of 8.77 taka. Even in the current fiscal year, the rate has only decreased to 12 taka per unit, still 27% higher than other private producers in India. This disparity has led to a substantial annual power subsidy bill for the Bangladeshi government, which is currently estimated at 320 billion taka.

Khan has pointed out that the high prices necessitate government subsidies, and he has expressed a desire for power prices, not just from Adani but across the board, to fall below average retail prices. Despite the challenges posed by the high costs, Bangladesh continues to import power from Adani, although the company recently reduced its supply due to delayed payments. Khan reassured that Bangladesh possesses sufficient domestic capacity to meet its energy needs, although some plants are currently underutilized due to gas shortages.

The situation surrounding the Adani power deal highlights the complexities of energy procurement and the importance of ensuring fair pricing for consumers. As Bangladesh navigates these challenges, the outcome of the court investigation and potential renegotiations will be crucial in determining the future of its energy landscape. The government’s commitment to addressing these issues reflects a broader goal of achieving energy independence and affordability for its citizens.