Bangladesh is having difficulty paying its $800 million electricity payment to Adani Power Ltd. in India due to a worsening dollar shortage.
Despite the growing debt, Adani Power, a division of Adani Group, has promised to keep Bangladesh’s electricity supply steady, according to media sources.
The corporation has, according to the reports, pushed Bangladesh’s interim government to hasten the settlement of these dues since it is under increasing pressure from its lenders to repay debt related to the building of their power plant in India.
Adani Power has a 25-year power purchase deal with the Bangladesh Power Development Board, or PDB, under which it supplies electricity to Bangladesh from its coal-based facility in Godda, Jharkhand. The plant can produce 1,600 MW of power.
The agreement was signed by both sides on November 5, 2017.
Bangladesh now receives 700–800 MW of electricity per day, but the deal provides for up to 1496 MW; as a result, the monthly payment can range from $90 to $100 million.
In accordance with the arrangement, Sonali Bank is in charge of transferring money to Adani Group.
These payments are settled by Sonali Bank with dollars taken from Bangladesh Bank reserves.
Regarding this transaction, an email has been reviewed by bdnews24.com.
The letter claims that $1,121 million will be sent by Bangladesh Bank to cover power bill payments between June 2023 and May 2024.
But Sonali Bank hasn’t been able to pay the entire amount because of the dollar shortage, leaving an outstanding balance of $476 million. December 2023 saw the delivery of the final $3.5 million half payment.
Bangladesh owes $645 million in outstanding debt as of May. The sum of the June and July amounts comes to more than $800 million.
The general director of Sonali Bank, Mohammad Afzal Karim, stated to bdnews24.com: “Yes, we are unable to clear all payments at once. We are paying in installments.
“Compared to needs, the dollars received from export earnings and remittances are inadequate. Nevertheless, we obtain dollars from interbank sources to match demand as needed,” he continued.
Bangladesh’s reserves have decreased to $20.50 billion during the last two years due to a prolonged currency shortfall.
To address the situation, the interim administration is asking the International Monetary Fund, or IMF, for an additional $3 billion.
“The dollars earned from remittances and export earnings are insufficient compared to the needs,” Sonali Bank’s MD, Afzal, told bdnews24.com. Nevertheless, we obtain dollars from interbank sources to match demand as needed,” he continued.
The PDB’s chairman, Md. Rezaul Karim, stated to bdnews24.com that there is now just one deal with Sonali Bank. The lack of dollars at Sonali Bank, however, has resulted in past-due payments for Adani’s electrical bills.
He said, “We are talking with the governor about whether we can include another bank in this agreement that has a better dollar supply.”
Abdur Rouf Talukder, the former governor of Bangladesh Bank, tried to sell reserves in order to guarantee the market’s supply of dollars.
Governor Ahsan H. Mansur changed his mind and opted not to sell dollars from the reserves when the Awami League government fell.
“Dollar supply to banks is increasing because remittance flows have risen,” stated Afzal, MD of Sonali Bank. Banks will utilize this money to settle electricity and energy bills from the government.
“The responsibility for paying dollars for these government contracts lies with the banks with which the agreements are made,” Bangladesh Bank spokesperson Mejbaul Haque said to bdnews24.com. Due to their lack of dollars, these banks used to receive support from the reserves.
According to bdnews24.com, a top Bangladesh Bank official, Adani’s electricity costs have been paid directly out of reserves. They have had to rely on central bank reserves since Sonali Bank did not have enough dollars, which is not ideal right now.
He said that additional assessment of the power agreement with Gautam Adani was necessary to decide if payments should have come from reserves or from a bank with a reliable reserve position.
Former head economist of the World Bank’s Bangladesh office Zahid Hussain thinks it was a wise idea to withhold dollar funding for opening LCs from reserves for commercial banks.
He said that considering the condition of the foreign exchange reserves at the moment, the decision had to have been taken sooner.
“The reserves have dropped to the point where more declines are not possible. Reserves must be raised in order to guarantee stability, he continued.
The Adani dispute gained prominence after an issue with the coal pricing system of Adani’s power purchase agreement was discovered.
According to energy expert M Shamsul Alam, there has always been controversy surrounding the importation of electricity from Adani Power.
“Electricity is imported from multiple locations throughout India. Adani’s electricity costs more than Tk 14, while the capacity charge there is somewhat higher than Tk 8. This is just too high. Reviewing the causes of this disparity is necessary. Priorities should be given to the needs of the people and the nation. I think we should reexamine this arrangement,” he remarked.
“If any irregularities or corruption are found, the Adani power deal should be scrapped,” he added.
India’s first transnational power project to be put into service is the $2 billion Godda project.
In April 2023, the power plant started operating for profit.
Since June 2023, Bangladesh has constantly received power from the facility.
Adani Power had a notable 55.33 percent decrease in net profit during the first quarter of the 2024–25 fiscal year compared to the first quarter of 2023–24, despite a decrease in net debt and financing costs as of June 30.
