NEW DELHI: Authorities in Bangladesh have sought a revision of an agreement with Adani Power Ltd for importing electricity from a thermal power plant in Jharkhand over the “excessive” pricing of coal, according to a Bangladeshi media report.
The Bangladesh Power Development Board (BPDB) signed a 25-year power purchase agreement (PPA) with Adani Power in Dhaka in November 2017 to supply 1,496 megawatts (MW) of electricity from a coal-based power plant at Godda in Jharkhand.
BPDB, which oversees the development of Bangladesh’s power sector, has sent a letter to Adani Power regarding revision of the agreement, the United News of Bangladesh (UNB) news agency reported, citing unnamed officials. Dhaka’s position on the issue was also communicated to Adani Power when Bangladesh’s state minister for power, Nasrul Hamid, visited the power plant in the first week of January, the report said.
External affairs ministry spokesperson Arindam Bagchi, while responding to questions on the issue at a weekly media briefing, described the matter as a deal between a sovereign government and an Indian company. “I don’t think we are involved in this,” he said.
India believes greater economic integration with neighbors assists the process of development. “We have been talking about our neighbors benefiting from the economic growth of India. We have tried to make it easier for connectivity, be it physical or energy or power transmission…This is part of our larger strategy of Neighborhood First. Under that we would like to see greater economic interconnections, integration of projects, investments, but if a certain project is not working for financial or economic reasons, I don’t think that’s a reflection on the relationship,” he said.
The UNB report said BPDB’s letter is a formal request for the agreement to be reviewed and the tariff structure to be adjusted before Bangladesh can start importing electricity. The plant is expected to start exporting 750 MW to Bangladesh from March.
“We have sent a letter to the Adani Group following a request we received in relation to opening LCs (in India) to import the coal that will be used as fuel for the 1,600 MW plant in Jharkhand,” a senior unnamed BPDB official was quoted as saying by UNB.
Adani Power requested BPDB to issue a demand note while quoting a coal price of $400 per metric ton (MT) – far above what BPDB officials believe the rate should be given the current state of the global market, the report said.
“In our view, the coal price they have quoted ($400/MT) is excessive – it should be less than $250/MT, which is what we are paying for the imported coal at our other thermal power plants,” the official cited said , according to the UNB report.
Since almost all the power from the plant in Jharkhand will be exported to Bangladesh, Adani Power needs a demand note from BPDB to open letters of credit for coal imports. The cost of importing coal, including transport from port to plant, will be borne by Bangladesh and the price is factored into the power purchase agreement’s tariff structure.
The agreement has been at the center of a controversy in Bangladesh in recent weeks, especially due to the tariff for energy from the $1.7-billion plant in Jharkhand, which is higher than what Bangladesh currently pays to other private electricity providers. Bangladeshi experts have also questioned the lack of a provision in the agreement to cap the price of coal, especially when such a clause is part of agreements with other foreign power suppliers.
UNB also quoted unnamed BPDB officials as saying that the absence of a “provision for discounts” on coal purchases in the agreement with Adani Power “allowed the Indian firm to quote such a steep bill for the coal”. The report further noted that coal for the project will be procured from the Adani-owned Carmichael mine in Queensland, Australia.
The officials say Bangladesh will end up paying Taka 20-22 for each unit of electricity from the Adani plant, whereas electricity from coal-fired plants in Bangladesh is below Taka 12 per unit. The officials said if the pricing mechanism for coal isn’t adjusted, it would be unviable for Bangladesh to import power from the Godda plant.
The report cited documents from Bangladesh’s Power Division as saying that the country will pay Adani Power an estimated $23.87 billion, or almost Taka 240,000 crore, over the 25-year cycle of the plant if the agreement remains unchanged.