Amidst growing concerns over pricing and potential legal challenges, Bangladesh is poised to re-evaluate a crucial power purchase agreement with India’s Adani Power. This decision comes as the new government has formed a panel to assess the merits of contracts signed by its predecessor, particularly those criticized for lack of transparency and expedited through special legislation.
At the heart of this scrutiny lies a 2017 agreement, spanning 25 years, to purchase electricity from Adani’s $2 billion, 1,600-MW power plant in Jharkhand, India. This project, supplying nearly 10% of Bangladesh’s electricity demand, has attracted attention due to allegations of inflated pricing.
While completely canceling the deal is deemed challenging, sources suggest a potential solution could involve a mutual agreement to reduce the electricity tariff. A legal challenge in international courts is also considered unlikely to succeed without substantial evidence of wrongdoing.
The Adani deal has drawn criticism for charging Bangladesh approximately 12 taka ($0.1008) per unit, which is 27% higher than rates offered by other private Indian producers and a staggering 63% higher than those offered by Indian state-owned plants.
Despite the price concerns, Bangladesh has been sourcing electricity from Adani since April 2023, alongside roughly 1,160 MW from other Indian power plants. However, Dhaka is facing a mounting debt of $800 million to Adani Power, part of over $1 billion owed to Indian power companies, due to difficulties in accessing dollars for payments.
While Adani Power maintains it has not received any official indication of a review by Bangladesh, the company acknowledges the outstanding dues, stating they are “of significant concern and are rendering plant operations unsustainable.” Adani Power has expressed confidence that Bangladesh will fulfill its financial commitments, echoing its commitment to adhering to contract terms. However, they have not addressed the discrepancy in their pricing compared to other suppliers.
The Bangladesh Nationalist Party (BNP) has joined the chorus of criticism, emphasizing the need for a thorough review of the Adani deal. Senior party leader Zainul Abdin Farroque asserts that the deal has raised serious concerns about overpricing from the outset, and he is hopeful the government will make a sound decision in this review.
The interim government, led by Nobel laureate Muhammad Yunus, assumed power in Bangladesh following deadly protests in August. It has since cancelled projects like a floating LNG terminal proposed by Summit Group, indicating a willingness to re-evaluate existing deals. As this power purchase agreement with Adani Power undergoes scrutiny, it remains to be seen how this critical energy partnership will evolve.
