DHAKA: Bangladesh’s interim government has alleged that the Indian energy supplier Adani Power violated a multi-billion-dollar agreement by withholding tax benefits that a central power plant received from India.
In 2017, the Indian company signed an agreement with Bangladesh to provide energy from its coal-fired plant in eastern India.
Bangladesh hoped to renegotiate the deal, which was awarded by then-Prime Minister Sheikh Hasina without a tender process and costs Bangladesh far more than its other coal power deals.
Dhaka has been late on making payments to Adani Power since supply started in July 2023. It owes several hundred million dollars for energy that has already been provided.
Bangladesh’s interim power minister Muhammad Fouzul Kabir Khan told Western media that the country now had enough domestic capacity to handle without the Adani supply.
Nobel Peace Prize laureate Muhammad Yunus assumed power in August following a student-led revolution that ousted Sheikh Hasina. Hasina had governed Bangladesh for much of the past two decades and was a close ally of Indian Prime Minister Narendra Modi.
Last month Adani Group reduced its electricity supply to Bangladesh by 50% from its Godda coal-fired power plant in Jharkhand, India, due to Bangladesh’s accumulated unpaid bills.
The situation worsened after Adani warned Bangladesh in September about rising receivables, emphasising the financial strain of maintaining supply commitments without timely payments.
Adani Power spokesperson said that the company had upheld all contractual obligations and had no indication Bangladesh was reviewing the agreement.
The company stated that the deal helped to achieve Indian foreign policy objectives and India in 2019 designated the plant as part of a special economic zone.
Under the contract and implementation agreement signed on November 5, 2017, between Adani Power and the state-run Bangladesh Power Development Board (BPDB), the power supplier was required to promptly notify Bangladesh of any changes to the plant’s tax status and pass on the “benefit of a tax exemption” granted by the Indian government.
However, Adani Power failed to comply, as indicated in letters from BPDB sent on September 17, 2024, and October 22, 2024, which urged the company to remit the tax benefits.
BPDB officials estimate that passing on the benefit could save about 0.35 cents per unit of power. The Godda plant supplied 8.16 billion units of electricity in the year ending June 30, 2024. This suggests potential savings of approximately $28.6 million.
Power minister Khan said the savings would be a key part of future talks with Adani Power.
Bangladesh in November scrapped a 2010 law that allowed Hasina to award some energy agreements without a bidding process.
In September, Yunus’s government appointed a panel of experts to assess a major energy contract signed by Hasina. A Bangladesh court has also ordered an investigation of the Adani deal.
Another panel asked to study the economy said in a white paper submitted to Yunus on December 1 that the U.S. charges against Adani meant Bangladesh should “scrutinise” the power agreement, which it described as “negotiated hastily.”
Adani Power claims it is owed $900 million, while BPDB says arrears are about $650 million. Agencies
