Bangladesh is increasing its payments to Adani Power following a significant reduction in electricity supplies by the Indian conglomerate, reportedly due to an outstanding bill of $800 million.
According to two senior government officials who spoke to the BBC, partial payments to Adani are being issued. Adani is responsible for supplying 10% of the electricity consumed in Bangladesh.
A senior official from the Bangladesh Power Development Board confirmed that payment issues have been resolved, and a letter of credit amounting to $170 million (£143 million) has been issued to the Adani group.
Adani provides electricity to Bangladesh through its 1,600-megawatt coal-fired power plant in eastern India. The company has yet to address the BBC’s inquiries regarding reductions in supply to Bangladesh, a nation that frequently experiences power shortages.
According to officials, the company has warned that it will halt all supplies unless the outstanding payments are settled by 7 November. However, an official from the Bangladesh Power Development Board expressed confidence that a complete supply cutoff is unlikely.
Officials in Bangladesh have informed the BBC that they plan to implement payments gradually and regularly, expressing confidence in their ability to address the ongoing payment crisis.
“We are taken aback and astonished that, despite our efforts to increase payments, there has been a supply reduction.” “We are prepared to fulfill our repayment obligations and will explore alternative arrangements; however, we refuse to allow any power producer to hold us hostage or engage in blackmail,” stated Fouzul Kabir Khan, energy adviser to the interim government.
According to reports, Bangladesh has increased its repayment amounts significantly, from $35 million in July to $68 million in September, reaching $97 million in October.
Rural areas across the country are currently grappling with heightened power shortages.
Political turmoil
Bangladesh needs to work on generating the dollar revenues necessary to finance its expensive essential imports, including electricity, coal, and oil. In the wake of months marked by student-led protests and significant political upheaval, foreign currency reserves experienced a decline following the ousting of the Sheikh Hasina government in August.
The interim government that succeeded her is now pursuing an extra $3 billion loan from the International Monetary Fund (IMF), supplementing its current $4.7 billion bailout package.
The power deal between Adani and Bangladesh, established in 2015, was among several agreements made during Sheikh Hasina‘s administration, which the current interim government has described as lacking transparency. A national committee is reviewing 11 prior contracts, including the controversial deal with Adani, which has faced criticism for its high costs.
In addition to Adani Power, several other Indian state-owned companies are selling electricity to Bangladesh, such as NTPC Ltd and PTC India Ltd. Officials from the Power Development Board have verified that they are making partial payments to various Indian power suppliers for outstanding debts.
Bangladesh will restart several gas-fired and oil-fired power plants to address the supply shortfall. However, experts caution that this move will likely lead to higher electricity costs. As winter draws near, the grid’s power demand is anticipated to decrease, coinciding with the shutdown of air conditioning units.
“With other coal-fired plants operating at only 50% capacity and the nation facing challenges in securing sufficient coal due to the dollar crisis, maintaining a steady power supply from Adani has become crucial.” “It is slightly pricier than local producers, yet it represents a vital supply,” stated Dr. Ajaj Hossain, an energy expert and retired professor.
Bangladesh is set to launch its inaugural nuclear power plant in December, marking a significant step towards diversifying its energy portfolio. The project, developed with support from Russia, carries a price tag of $12.65 billion, primarily funded through long-term loans from Russian sources.
