Bangladesh’s interim government has reportedly raised concerns over a multi-billion-dollar agreement with Adani Power, accusing the Gautam Adani-led company of not passing on tax benefits related to a power plant critical to the deal, reports Reuters.
In 2017, Adani Power, owned by billionaire Gautam Adani, entered into an agreement to supply power from its coal-fired plant in eastern India to Bangladesh. The Bangladeshi government is now seeking to renegotiate the deal, which it claims is costing more than other similar power deals, according to Bangladesh power agency documents and letters between the two parties cited in the report, which also interviewed six Bangladesh officials.
Bangladesh has been facing delays in payments to Adani Power since the supply began in July 2023, and the two sides are in dispute over the total amount owed, the report said.
Bangladesh’s energy minister, Muhammad Fouzul Kabir Khan, stated that the country now has sufficient domestic power generation capacity, though some plants remain inactive.
The deal includes provisions for tax exemptions, but Bangladesh claims that Adani Power did not inform them of changes to the plant’s tax status, as required by the agreement. This failure has led to concerns over potential savings that Bangladesh believes it should have received. The Bangladesh Power Development Board (BPDB) estimates potential savings of around $28.6 million from the tax benefits.
The Reuters report revealed details about Bangladesh’s plan to reopen the 25-year deal, and that it hopes to use the fallout from US prosecutors’ November indictment of Adani and seven other executives for their alleged role in a $265 million bribery scheme to press for a resolution.
The agreement in 2017 was awarded by then-Prime Minister Sheikh Hasina without a tender process, according to the Bangladesh power agency documents.
However, Adani Power has not been accused of wrongdoing in Bangladesh. A company spokesperson cited in the report said that Adani Power had upheld all contractual obligations and had no indication Dhaka was reviewing the contract.
In September this year, the Bangladesh interim government led by Nobel peace prize laureate Muhammad Yunus appointed a panel of experts to examine major energy deals signed by Hasina. A Bangladesh court has separately ordered a probe of the Adani deal, the Reuters report said.
Another panel asked to study the economy said in a white paper submitted to Yunus on December 1 that the US charges against Adani meant Bangladesh should “scrutinise” the power deal, which it described as “negotiated hastily.”
Adani halves power supply over payment dispute
The dispute over payment mentioned above in this report led to Adani Power reducing its supply of electricity in response.
On October 31, Adani Power reportedly cut the power supply from Godda to half in response to the payment dispute with Bangladesh.
The company in a July 1 letter seen by Reuters also rejected a request from BPDB to extend a discount it had offered until May – resulting in savings of about $13 million for Bangladesh. It said it would not consider further discounts until payment was cleared.
Adani Power contends it is owed $900 million, while BPDB says arrears are about $650 million. Bangladesh suffers from a dollar shortage and BPBD officials told Reuters they haven’t been able to obtain sufficient foreign currency for payment.
The halving of supply particularly angered Bangladesh, BPDB Chair Md. Rezaul Karim said, because it came after Dhaka in October remitted $97 million to Adani Power – its highest monthly payment this year.
The dispute revolves around how power tariffs are calculated, with the 2017 agreement pricing off an average of two indices.
The unit cost of energy from Adani’s Godda thermal power was 55 per cent above the average of all Indian power sold to Dhaka, according to the summary of Bangladesh’s power purchases cited in the report.
Bangladesh has been seeking that Adani Power uses other benchmarks that would lower the tariff after one of the indices was revised last year, the report quoted three BPDB sources.
Adani Power has rejected that, one of them said, adding the two sides were meeting soon.
Bangladesh’s de facto power minister Muhammad Fouzul Kabir Khan said country’s next move depended on the outcome of the court-ordered investigation.
“If it is proven that bribery or irregularities had happened, then we will have to follow the court order if any cancellation happens,” he said.