Bangladesh’s ongoing attempts to renegotiate a high-stakes power purchase agreement with India’s Adani Power are poised to have significant financial and economic implications. The deal, which originally required Bangladesh to pay $23.87 billion over 25 years, has faced growing criticism over its high costs and alleged irregularities.
Mounting Costs and Financial Strain
The electricity supplied from Adani’s Godda coal-fired power plant has drawn fire for being disproportionately expensive. Reports indicate that the power costs about three times more than electricity sourced from other Indian suppliers and nearly 1.5 times the cost of domestic production. This has left the Bangladesh Power Development Board (BPDB) facing annual projected losses of $81.34 million.
Adding to the strain, Bangladesh’s foreign currency reserves have declined, complicating its ability to make payments in U.S. dollars—a stipulation of the agreement. The BPDB reportedly owes Adani hundreds of millions of dollars in arrears, further exacerbating the financial tension.
Potential Savings Through Renegotiation
In its bid to alleviate these financial burdens, Bangladesh is seeking to renegotiate key terms of the agreement. Officials have estimated potential savings of $28.6 million by addressing the tax exemptions granted to Adani under India’s special economic zone policies, which were allegedly not passed on to Bangladesh as stipulated in the contract.
The renegotiation push comes amid legal and political scrutiny. The Bangladesh High Court has ordered a review of the agreement, questioning its validity due to alleged irregularities, including claims of bribery during its formation in 2017.
Adani Power’s Response
Adani Power has denied any allegations of misconduct, stating that it has adhered to all contractual obligations. The company has also dismissed claims related to tax benefits and contractual breaches as baseless. Despite this, tensions have escalated, with Adani recently reducing its power supply to Bangladesh by half, citing payment delays.
Broader Implications for Bangladesh
The reduced power supply, from approximately 1,400 megawatts (MW) to 700-800 MW, has deepened an already critical energy shortfall in Bangladesh, where demand continues to rise. This has disrupted industries, particularly in the manufacturing and textile sectors, and led to widespread blackouts affecting millions.
To mitigate these issues, Bangladesh has increased coal-fired power generation domestically but at a significant environmental and financial cost. Experts argue that long-term investments in renewable energy and energy efficiency are vital to reduce dependence on costly imports and stabilize the sector.
Looking Ahead
The outcome of the renegotiation could shape the trajectory of Bangladesh’s energy policy and economic stability. Success in revising the deal might provide much-needed fiscal relief and pave the way for investments in sustainable energy. However, failure to reach an agreement could leave the country grappling with continued financial and energy challenges.
As the interim government navigates these negotiations, the stakes remain high, with potential ramifications for both Bangladesh’s economy and its bilateral relations with India. Observers will be watching closely to see whether the country can secure a more equitable energy deal.
