Bangladesh’s interim government has accused energy supplier Adani Power of breaching a multi-billion-dollar agreement by withholding tax benefits that a power plant central to the deal received from New Delhi, according to documents seen by Reuters.

In 2017, the Indian company controlled by billionaire Gautam Adani signed an agreement with Bangladesh to provide power from its coal-fired plant in eastern India. Dhaka has said it hopes 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, according to Bangladesh power agency documents and letters between the two parties reviewed by Reuters, as well as interviews with six Bangladesh officials.

Dhaka has been behind on payments to Adani Power since supply started in July 2023. It owes several hundred million dollars for energy that has already been supplied, though the two sides dispute the exact size of the bill. Bangladesh’s de facto Power Minister Muhammad Fouzul Kabir Khan told Reuters the country now had enough domestic capacity to cope without the Adani supply, though not all domestic power generators were operational.

Nobel peace prize laureate Muhammad Yunus took power in August after a student-led revolution ousted Ms. Hasina, who critics accuse of stifling democracy and mismanaging the economy. She ran Bangladesh for most of the last two decades and was a close ally of Prime Minister Narendra Modi. Reuters is reporting for the first time that the contract came with an additional implementation agreement that addressed the transfer of tax benefits.

The news agency is also revealing details about Bangladesh’s plan to reopen the 25-year deal, and that it hopes to use the fallout from U.S. prosecutors’ November indictment of Adani and seven other executives for their alleged role in a $265 million bribery scheme to press for a resolution.

Adani Power has not been accused of wrongdoing in Bangladesh. A company spokesperson said in response to Reuters‘ questions that it had upheld all contractual obligations and had no indication Dhaka was reviewing the contract. The company did not answer questions about the tax benefits and other issues raised by Bangladesh. Adani Group has called the U.S. allegations “baseless.”

Tax Exemptions

Adani Power’s Godda plant runs off imported coal and was built to serve Bangladesh.

The company said the Bangladesh deal helped further foreign policy objectives and Delhi in 2019 declared the plant part of a special economic zone. It enjoys incentives such as exemptions on income tax and other levies.

The power supplier was required to inform Bangladesh swiftly of changes in the plant’s tax status and to pass on the “benefit of a tax exemption” from India’s government, according to the contract and implementation agreement signed on November 5, 2017 between Adani Power and the state-run Bangladesh Power Development Board (BPDB).

But Adani Power did not do so, according to letters sent by BPDB on September 17, 2024 and October 22, 2024 that urged it to remit the benefits.

The agreements and letters are not public but were seen by Reuters.

Two BPDB officials, who spoke on condition of anonymity because they were not authorised to talk to the media, said they did not receive responses.

“BPDB estimates savings of roughly 0.35 cents per unit of power if the benefit was passed on,” the officials said. The Godda plant supplied 8.16 billion units in the year to June 30, 2024, according to an undated Bangladesh government summary of power purchases seen by Reuters, suggesting potential savings of about $28.6 million.

Power Minister Khan said the savings would be a key part of future discussions with Adani Power.

‘Negotiated hastily’

Bangladesh in November scrapped a 2010 law that allowed Ms. Hasina to award some energy deals without a competitive bidding process.

“The absence of tenders is unusual,” said Tim Buckley, director of Australia’s Climate Energy Finance think-tank, adding that auctions ensure “the best price possible.”

In September, Mr. Yunus’s government appointed a panel of experts to examine major energy deals signed by Ms. Hasina. A Bangladesh court has separately ordered a probe of the Adani deal.

Another panel asked to study the economy said in a white paper submitted to Mr. Yunus on December 1 that the U.S. charges against Adani meant Bangladesh should “scrutinise” the power deal, which it described as “negotiated hastily.”

Ms. Hasina, who has not been seen in public since she fled to India, could not be reached. Her son and adviser Sajeeb Wazed told Reuters he was not aware of the Adani Power deal but that he was “sure there was no corruption.”

“I can only assume the Indian government lobbied for this deal so it was made,” he said in response to allegations of political interference.

Mr. Modi’s office and other Indian officials did not respond to requests for comment.

On October 31, Adani Power halved the power supply from Godda in response to the payment dispute with Bangladesh.

The company in a July 1 letter seen by Reuters also rejected a request from BPDB to extend a discount it had offered until May — resulting in savings of about $13 million for Bangladesh. It said it would not consider further discounts until payment was cleared.

Adani Power contends it is owed $900 million, while BPDB says arrears are about $650 million. Bangladesh suffers from a dollar shortage and BPBD officials told Reuters they haven’t been able to obtain sufficient foreign currency for payment. The halving of supply particularly angered Bangladesh, BPDB Chair Md. Rezaul Karim said, because it came after Dhaka in October remitted $97 million to Adani Power — its highest monthly payment this year.

The dispute revolves around how power tariffs are calculated, with the 2017 agreement pricing off an average of two indices.

The unit cost of energy from Godda was 55% above the average of all Indian power sold to Dhaka, according to the summary of Bangladesh’s power purchases. Bangladesh is pressing for Adani Power to use other benchmarks that would lower the tariff after one of the indices was revised last year, said three BPDB sources.

Adani Power has rejected that, one of them said, adding the two sides were meeting soon.

The agreements stipulate that arbitration be carried out in Singapore, but Mr. Khan said Bangladesh’s next move depended on the outcome of the court-ordered investigation.

“If it is proven that bribery or irregularities had happened, then we will have to follow the court order if any cancellation happens,” he said. ($1 = 119.0000 taka).

Gautam Adani, Chairman, Adani Group.
| Photo Credit: ANI

Bangladesh has halved the power it buys from Adani Power, citing lower winter demand, government officials told Reuters on Monday (December 2, 2024), amid disagreements over dues running into hundreds of millions of dollars.

Adani, whose founder has been accused by U.S. authorities of being involved in a bribery scheme in India, charges which he has denied, halved supply to Bangladesh on Oct. 31 over payment delays as the country battles a foreign exchange shortage.

Subsequently Bangladesh told Adani to keep supplying only half the power for now, officials said, although it will keep paying its old dues.

“We were shocked and angry when they cut our supply,” said Md. Rezaul Karim, chairperson of the state-run Bangladesh Power Development Board (BPDB). “Winter demand is now down, so we have told them there is no need to run both units of the plant.”

Adani has been supplying power under a 25-year contract signed in 2017 under ousted Prime Minister Sheikh Hasina, from a $2-billion power plant in Jharkhand that has two units, each with capacity of about 800 megawatts.

A document seen by Reuters showed the plant ran at only 41.82% capacity in November, the lowest this year, with one unit shut since Nov. 1.

Two BPDB sources said Bangladesh had bought about 1,000 MW a month from Adani last winter, adding that Adani had asked the board when it would resume normal purchases, but had not received a definitive answer.

An Adani Power spokesperson said the firm was continuing supply to Bangladesh, although mounting dues were a significant concern, making plant operations unsustainable.

“We are in constant dialogue with senior officials of BPDB and the government, who have assured us that our dues will be cleared soon,” said the spokesperson.

The firm was confident Bangladesh would fulfil its commitments, just as Adani had upheld its contract obligations, he added.

Mr. Karim said Bangladesh owed Adani about $650 million, and paid about $85 million last month and $97 million in October.

An Adani Power source, speaking on condition of anonymity, said the dues had jumped to about $900 million, hurting its debt profile and risking a higher cost of funds.

Bangladesh wants to sharply lower prices under the Adani deal, unless it is cancelled by a court, which has called for an investigation into it, the de facto minister for power and energy told Reuters on Sunday.

The Adani Power spokesperson said the firm had no indication that Bangladesh was reviewing its power purchase pact.

Adani charges the highest rate of all Indian suppliers to Bangladesh, a government document seen by Reuters showed.

Its cost per unit was 14.87 taka during the fiscal year that ended on June 30 2024, compared with an average of 9.57 for all Indian suppliers.

The retail price in Bangladesh is 8.95 taka a unit, leading to an annual power subsidy bill of 320 billion taka ($2.7 billion).

“Because the prices are high, the government has to subsidise,” said Muhammad Fouzul Kabir Khan, Bangladesh’s power and energy adviser. “We would like power prices, not only from Adani, to come down below the average retail prices.”