The controversial power deal with the Adani group was structured to give the Adani Group more than double the benefits, leading to inflated electricity prices.
Amidst an ongoing dollar and reserve crisis, the Bangladesh government was forced to pay another installment to cover the Adani Group’s electricity import bill on Wednesday and Thursday. The payment came at a time when the interbank dollar rate jumped to Tk120 from Tk118.
Experts believe that there’s now a chance to renegotiate this unfavorable agreement, which was made under the Speedy Power and Energy Supply (Special) Act 2010. By properly reviewing and revising the deal, they suggest that costs could be cut by at least 50%.
Currently, Bangladesh is stuck paying a hefty sum every month because of this deal.
In 2023, Bangladesh purchased Adani's electricity for Tk14.02 a kilowatt-hour (or a unit), when Bangladesh purchased an additional 1,100MW of power from India's electricity exchange market at Tk7.83 per unit.
With a framework agreement in 2010, Bangladesh started importing power from India in 2013. In that period before the dollar rate began to soar, India's power cost per unit was about Tk6.
Bangladesh has been buying 1,600MW power from Adani's plant since 2023 under a deal signed in 2017 without any public disclosure.
With the total generation of 14,000MW, which costs only Tk8 per unit on average, Adani Power supplies 1,600MW at a cost of Tk14 per unit.
This raises the average unit cost by 7.69% to Tk8.61 per unit.
How to renegotiate?
“The Adani contract was not executed properly. Many clauses of the agreement were not properly made for Bangladesh. Now they can be renegotiated,” Dr Ijaz Hossain, former professor of Bangladesh University of Engineering and Technology (Buet), told Dhaka Tribune.
“In that case, excluding many other things including capacity charges, an outline of coal price should be fixed and a new contract should be made so that both parties benefit. Because of this high price, failure to pay their dues on time is damaging Bangladesh’s reputation globally,” he added.
Seeking anonymity, a Bangladesh Power Development Board (BPDB) official said: "Bangladesh has to spend more than double to import electricity from Adani's power plants as compared to the average cost of imports under the management of the Indian government. So if Adani's contract were renegotiated and tariffs reduced, it could save up to 50% of what the government pays Adani now."
If the government wants to renegotiate the agreement, now is the right time to do so, the official said, adding that the renegotiation would save Bangladesh a huge amount of money.
M Tamim, Adviser to the 2007-08 caretaker government chief on energy affairs told the Dhaka Tribune: “I don't know what is inside the agreement. If there is any clause regarding renegotiation then the Adani power deal requires scrutiny.”
Such purchase agreements typically include a clause allowing for renegotiation in the event of disputes or withdrawal by any party in the event of a contract violation, he added.
Prof Tamim, a teacher of Petroleum and Mineral Resources Engineering, Buet, also said: “it is unacceptable if the agreement is one-sided and the electricity rate is discovered to be greater than that of plants that are comparable, such Payra, Matarbari, or Rampal.”
Special act amendments
Amendments to the BERC Act 2003 and Speedy Power and Energy Supply (Special) Act 2010 will remain suspended, Dr M Fauzul Kabir Khan, the newly appointed advisor of the Ministry of Power, Energy and Mineral Resources, the Ministry of Road Transport and Bridges and Ministry of Railway informed this on 18 August after his maiden meeting with the ministry officials.
The Quick Enhancement of Electricity and Energy Supply (Special Provision) Act, 2010 allows signing deals without tender for all types of power and energy projects, including electricity generation and transmission, gas exploration or import of coal and other fuels. In 2021, the law got a five-year extension to 2026.
Government initiatives may bring another window of hope, an insider said.