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TL;DR
- Bangladesh is likely to maintain its power purchase agreement with India’s Adani Power despite pricing concerns and legal challenges.
- The interim government, led by Muhammad Yunus, is reviewing contracts for transparency and national interest protection.
- Adani’s electricity costs Bangladesh significantly more than other Indian suppliers, but exiting the deal is not feasible.
- Bangladesh owes $800 million to Adani Power, and the government is in discussions to resolve payment issues.
Bangladesh is poised to maintain its power purchase agreement with India’s Adani Power, despite ongoing concerns about pricing and the potential for legal challenges. This decision comes as the country grapples with supply worries and the likelihood of an unsuccessful legal challenge, according to sources familiar with the situation.
The interim government, led by Nobel laureate Muhammad Yunus, has established a committee to evaluate whether contracts made by the previous administration adequately safeguarded national interests. These contracts, including the one with Adani Power, have been criticized for their lack of transparency and were expedited under a special law. The committee’s review is part of a broader effort to scrutinize energy sector agreements that were signed during the 15-year tenure of the Awami League government, which was overthrown in August following widespread protests.
Adani Power supplies electricity to Bangladesh from its 1,600 MW plant in Jharkhand, India. Since April 2023, this plant has been meeting nearly 10% of Bangladesh’s power demand. The cost of electricity from Adani is approximately 12 taka ($0.1008) per unit, which is significantly higher than rates from other Indian private producers and state-owned plants. Despite these higher costs, Bangladesh’s options are limited due to the critical role Adani’s power plays in its energy supply.
An official from the Bangladesh Power Development Board noted that the cost discrepancy is as much as 63% more than what Indian state-owned plants charge. However, exiting the deal is considered unfeasible without strong evidence of wrongdoing that could hold up in an international court. Instead, a mutual agreement to reduce tariffs may be the only viable solution.
Adani Power has expressed confidence that Bangladesh will honor its financial commitments, despite Dhaka’s current difficulty in clearing $800 million in dues owed to Adani and other Indian power companies. The financial strain is exacerbated by Bangladesh’s challenges in accessing dollars for payment.
Domestic critics, including members of the Bangladesh Nationalist Party (BNP), have been vocal about their concerns regarding the deal’s pricing structure. Zainul Abdin Farroque, a senior BNP leader, stated that “the deal with Adani has raised serious concerns about overpricing from the start,” and welcomed the government’s review.
The interim government has already taken steps to cancel several energy projects initiated by its predecessor, such as a floating LNG terminal planned by Summit Group. These actions reflect a broader shift in Bangladesh’s energy policy under Yunus’s leadership, aimed at ensuring greater transparency and protecting national interests in future agreements.
As Bangladesh navigates these complex challenges, maintaining a stable energy supply remains a top priority for the interim government amidst ongoing financial and political pressures.
Source: TBS News
