Indian energy giant Adani Power Ltd has been accused of charging extra energy (coal) costs, violating a side letter agreement made in April 2023 with the Bangladesh Power Development Board (BPDB).
Bangladesh has an agreement with Adani Power to import electricity from Adani’s 1600 MW Jharkhand power plant at a cost of $1.14 billion annually, with approximately $912 million allocated for energy costs.
The agreement, signed by the then Awami League government, outlined that the coal tariff for the power plant should not exceed the cost of energy at Bangladesh’s locally produced coal-based power plants.
Besides, BPDB data shows that Adani’s current energy tariff is approximately 1.10 cents higher than that of the Bangladesh-China joint venture power plant, and higher than other major coal-fired plants in Bangladesh, including the Bangladesh-India Friendship Power Company Ltd.
BPDB now owes Adani a total of $923.47 million.
BPDB official sources said they slowed down the payment of Adani’s average $95 million monthly electricity bills due to mismatch of energy cost as per the deal.
An official investigation is underway to probe the alleged overcharging, with the government considering steps to address the breach.
BPDB currently purchases bulk power from several coal-fired plants, including the 1,320 MW Payra Power Plant, a joint venture between BPDB and China’s CMC, the 1,320 MW Rampal Power Plant, a joint venture between BPDB and India’s NTPC, the 1,320 MW Banshkhali Power Plant owned by S. Alam and Chinese stakeholders, and the 1,600 MW Jharkhand Power Plant.
The government approved the installation of these base load power plants to provide low-cost electricity, with the aim of reducing generation costs over time and benefiting consumers, officials said.
However, officials noted that following the COVID-19 pandemic and the Russia-Ukraine war, both energy costs and the dollar exchange rate have risen sharply.
Additionally, officials mentioned that the Indo-Bangla and Dhaka-Beijing collaborations on these joint ventures have contributed to the higher costs, as these projects follow a cost-plus pricing model.
This cost structure also applied to the 1,600 MW Adani Jharkhand Power Project, which involved the installation of a 400 kV Baharampur-Bogura double-circuit transmission line, taking bilateral relations into account as part of government expenditure.
To mitigate criticism over high energy costs, Adani Power Ltd. signed a side letter agreement in April last year, which expired in March. Under this agreement, Adani was required to set its energy tariff at least one cent lower than the second-lowest imported coal-based power plant operating in Bangladesh.
Discussing the reasons behind the additional energy bills, a local PR agency appointed by Adani quoted the company, stating, “We are working with BPDB on reconciling the payable amount. Until this is finalized, any information regarding the monthly coal price is speculative and not conclusive.”
Regarding the alleged breach of Adani’s energy supply, Power and Energy Adviser Muhammad Fouzul Kabir Khan said that a government probe committee is investigating irregularities in the cost structure of Adani’s power plant.
The Power Division will take necessary steps based on the findings of the investigation into the additional energy costs charged by Adani, he added.
Meanwhile, the Consumers Association of Bangladesh (CAB) has called for the cancellation of the Adani deal and the formation of a reform commission to tackle irregularities in the power sector.
“We have already urged the government to cancel the deal with Adani, as the recent increase in power tariffs for consumers appears to favor the profitability of the Adani Group,” stated CAB Energy Adviser Dr. M Shamsul Alam.
The country’s total installed electricity generation capacity stands at 28,166 MW, including 5,028 MW from coal-based plants. Additionally, Bangladesh imports 2,656 MW of electricity from India, of which 1,600 MW comes from the Godda power plant in Jharkhand, India.
Despite efforts to introduce low-cost power plants, Bangladesh’s bulk electricity tariff remains at Tk 11.27 per unit, still creating a deficit for the country.