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Home»Finance»Bangladesh Calls for Revision of Power Purchasing Deal With Adani
Finance

Bangladesh Calls for Revision of Power Purchasing Deal With Adani

February 23, 2023No Comments5 Mins Read
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Bangladesh Calls for Revision of Power Purchasing Deal With Adani
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With Indian billionaire Gautam Adani’s business empire and practices coming under global scrutiny following accusations that he has been indulging in brazen stock manipulation and accounting fraud schemes, South Asian countries where the Adani Group struck deals are calling for revisiting of contracts.

Bangladesh, where Adani Power (Jharkhand) Ltd signed a Power Purchasing Agreement (PPA) with Bangladesh Power Development Board (BPDB) in 2017 has asked for a revision of the contract. “We have communicated with the Indian company seeking revision of the agreement,” an official of the state-run BPDB said.

It was during his visit to Bangladesh in 2015 that Indian Prime Minister Narendra Modi asked his Bangladeshi counterpart Sheikh Hasina to “facilitate the entry of Indian companies in the power generation, transmission and distribution sector of Bangladesh.” It culminated in the two sides inking deals worth $4.5 billion for Indian government-run and private companies to sell electricity to Bangladesh. This included a contract for Adani Power to build a $1.7 billion, 1,600-megawatt coal power plant in Godda in India’s eastern state of Jharkhand, which would supply power to Bangladesh.

Modi’s close relationship with Adani is said to have facilitated the building of the coal-fired Godda power plant and the PPA with Bangladesh.

Details of the contract were shrouded in secrecy, but a December 2022 report in the Washington Post threw some light on the agreement.

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Under the PPA, Bangladesh will pay $450 million annually for 25 years as capacity and maintenance charges, even if it does not take any electricity from Adani Power Ltd. If Bangladesh wants to use electricity from Adani, it will have to pay an additional amount for coal.

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The agreement provides for price fixing of coal by combining the Indonesian and Australian coal prices. Thus, each ton of Adani’s coal would cost Bangladesh around $400. This is 60 percent higher than the usual price of coal, according to BPDB.

It is the Adani Group that comes out as the beneficiary of the deal. Adani’s coal would travel on Adani ships to reach an Adani-owned seaport, and from there an Adani-built railway would haul the coal to Adani’s Godda Power Plant. Finally, the generated electricity would be transmitted from Godda to Bangladesh via Adani-built high-voltage lines.

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The PPA passed all associated costs of coal, including shipping and transmission, to Bangladesh. This has made Adani’s electricity over five times more expensive that the market price of bulk electricity in Bangladesh.

Not only was the power from the Adani Group exorbitantly priced, but also this was a purchase that Bangladesh did not need in the first place. Bangladesh’s power-generating capacity exceeds its peak demand by over 40 percent.

The PPA has been sharply criticized in Bangladesh. Transparency International Bangladesh (TIB) has described the contract signed by Adani Group and BPDB as “unequal, opaque, and discriminatory.”

“It seems that the agreement has ignored the interests of Bangladesh and favored the interests of Adani Group in such a way that the electricity sector of Bangladesh can become a hostage in the hands of this company,” Dr. Iftekhar Zaman, TIB’s executive director, said.

It may be recalled that in 2021, in response to mounting global concern over the environmental impact of coal-fired power plants and the cheaper cost of renewable energy, Bangladesh canceled ten of 18 planned coal-based power projects. Adani’s project was not among those canceled. According to the Washington Post report, B.D. Rahmatullah, a former director-general of Bangladesh’s power regulator, had observed then that “Hasina cannot afford to anger India, even if the deal appears unfavorable.”

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Much has been written about the close relationship between Prime Minister Modi and Adani, and the benefits this has brought to the latter’s business interests, including in Bangladesh.

Although the Indian government did promote Adani Power in the run-up to the PPA, it has distanced itself from the deal with Bangladesh. Responding to questions from the media regarding Bangladesh’s request for revising the agreement, Arindam Bagchi, spokesperson of India’s Ministry of External Affairs, said: “I don’t have anything on that. I understand you are referring to a deal between a sovereign government and an Indian company. I am not aware of it. I don’t even think we are involved in this.”

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The Adani Power-BPDB deal could have far-reaching effects. Anti-India sentiment is growing in Bangladesh, where there is anger over anti-Muslim violence in India, New Delhi’s reluctance to finalize an agreement on Teesta River water sharing, blasphemous remarks by BJP leaders, etc. The Adani deal will further fuel this anti-India sentiment.

This deal will also impact the Awami League government. Its proximity to India has earned it criticism from Bangladeshis who believe that India is helping the AL stay in power. Hasina agreed to a lucrative deal for Adani in return for New Delhi’s support to the AL government. The Adani deal stands testimony to the quid pro quo and will further delegitimize AL’s politics in Bangladesh. This is also a serious blow to the government’s development strategies, thereby empowering the opposition’s campaign to pick holes in Hasina’s developmental efforts and strategies.

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The high cost of Adani’s electricity will add to rising prices and the cost of living in Bangladesh, which is already reeling under an economic crisis. With the IMF pressuring the government to cut subsidies, survival for the common people will be particularly challenging. As Zaman observed, the “burden” of the PPA “will have to be borne by the people of this country.”

Adani Bangladesh calls Deal Power Purchasing Revision
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