Bangladesh expected to maintain power agreement with Adani: Report

14 Oct 2024 CW Team

The new government has established a panel to assess whether the contracts set by its predecessor sufficiently safeguarded the nation's interests, especially regarding projects criticized for a lack of transparency that were initiated under a special expediting law.

One of the contracts under review due to pricing issues is a 2017 agreement to procure electricity for 25 years from Adani's $2 billion, 1,600 MW power plant located in India's eastern state of Jharkhand, which exclusively supplies Bangladesh.

This project accounts for nearly ten per cent of Bangladesh's power demand, making an outright cancellation of the Adani deal challenging, as noted by one of the sources. Both sources requested anonymity because of the sensitive nature of the matter. Additionally, the source mentioned that a legal challenge in an international court would likely fail without substantial evidence of wrongdoing.

Although exiting the agreement may not be viable, the second source indicated that a mutual agreement to lower the tariff could be the only practical option.

When asked for comments regarding these remarks, Muhammad Fouzul Kabir Khan, the power and energy adviser, or de facto minister in the interim government, stated that the committee is currently reviewing the issue and that it would be premature to comment further.

According to an official from the Bangladesh Power Development Board, the cost of Adani power is approximately 12 taka ($0.1008) per unit, as cited in the latest audit report for the financial year 2023/24. This rate is 27 per cent higher than that of other private producers in India and as much as 63 per cent more than the prevailing market rate.

Bangladesh is expected to overlook pricing concerns and maintain a power purchase agreement with India's Adani Power, despite worries about supply and unfavourable prospects for a legal challenge, according to two sources familiar with the situation. The new government has established a panel to assess whether the contracts set by its predecessor sufficiently safeguarded the nation's interests, especially regarding projects criticized for a lack of transparency that were initiated under a special expediting law. One of the contracts under review due to pricing issues is a 2017 agreement to procure electricity for 25 years from Adani's $2 billion, 1,600 MW power plant located in India's eastern state of Jharkhand, which exclusively supplies Bangladesh. This project accounts for nearly ten per cent of Bangladesh's power demand, making an outright cancellation of the Adani deal challenging, as noted by one of the sources. Both sources requested anonymity because of the sensitive nature of the matter. Additionally, the source mentioned that a legal challenge in an international court would likely fail without substantial evidence of wrongdoing. Although exiting the agreement may not be viable, the second source indicated that a mutual agreement to lower the tariff could be the only practical option. When asked for comments regarding these remarks, Muhammad Fouzul Kabir Khan, the power and energy adviser, or de facto minister in the interim government, stated that the committee is currently reviewing the issue and that it would be premature to comment further. According to an official from the Bangladesh Power Development Board, the cost of Adani power is approximately 12 taka ($0.1008) per unit, as cited in the latest audit report for the financial year 2023/24. This rate is 27 per cent higher than that of other private producers in India and as much as 63 per cent more than the prevailing market rate.

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