Bangladesh Cuts Adani Power Imports To Half Amid Mounting Dues, High Costs & US Bribery Allegations; Check

Bangladesh has halved its electricity imports from India's Adani Power, citing a seasonal drop in demand and unresolved payment issues. The decision, taken amidst Bangladesh's foreign exchange crisis, highlights growing financial and operational tensions between the two parties under a long-term power supply agreement.

Winter Cutback in Imports

Adani Power reduced its electricity supply on October 31, citing delayed payments from Bangladesh. This move prompted the Bangladesh Power Development Board (BPDB) to officially request that Adani supply only half of the usual electricity quota, aligning with reduced winter demand while the country works on clearing its dues.

Md. Rezaul Karim, BPDB's chairperson, expressed frustration over Adani's initial supply cut. "We were shocked and angry when they cut our supply," Karim told Reuters. He added that with the current drop in demand, running both units of Adani's Jharkhand-based power plant is unnecessary.

Adani's Jharkhand Plant

Adani's 1,600-megawatt power plant in Jharkhand, built under a $2 billion project, supplies electricity to Bangladesh under a 25-year deal inked in 2017 during Sheikh Hasina's government. However, operations at the plant have slowed significantly.

In November, the plant operated at just 41.82% capacity, its lowest level this year, according to a Reuters-reviewed document. One of its two units has been offline since November 1, and officials at BPDB have not set a timeline for resuming full imports.

Mounting Debt Pressures

Bangladesh owes Adani approximately $650 million, with payments of $85 million made in November and $97 million in October. Despite these payments, Adani sources estimate total dues have escalated to nearly $900 million.

The mounting debt has strained Adani Power's financials, potentially increasing borrowing costs. The company has emphasized that it remains in constant communication with BPDB and Bangladeshi officials, who have assured them that outstanding payments will be cleared soon.

"We are confident Bangladesh will honour its commitments, as we have adhered to our contractual obligations," an Adani spokesperson said.

Scrutiny Over High Power Prices

Adani's electricity prices have drawn criticism for being significantly higher than those of other Indian suppliers. In the fiscal year ending June 2024, Adani charged 14.87 taka per unit, compared to an average of 9.57 taka from other Indian power providers.

This price disparity has increased the financial burden on Bangladesh, where retail electricity costs are capped at 8.95 taka per unit. The government spends approximately 320 billion taka ($2.7 billion) annually on electricity subsidies to bridge the gap.

"High power prices compel the government to subsidize," explained Muhammad Fouzul Kabir Khan, a power and energy adviser in Bangladesh. "We need power prices, including those from Adani, to fall below average retail prices."

Calls for Rate Reduction

Bangladesh is reportedly pushing for a significant reduction in Adani's rates. Although no formal review of the agreement has been announced, BPDB officials indicate that pricing adjustments are a priority given the economic strain.

*Inputs from Reuters*