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 Hasina, who critics accuse of stifling democracy and mismanaging the economy. She ran Bangladesh for the last two decades and was a close ally of Indian 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. In response to Reuters’ questions, a company spokesperson said 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 Indian 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 Nov. 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 Sept. 17, 2024, and Oct. 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 anonymously because they were not authorised to talk to the media, said they did not receive responses.
The officials said that BPDB estimates savings of roughly 0.35 cents per unit of power if the benefit was passed on. The Godda plant supplied 8.16 billion units in the year to June 30, 2024, according to an updated 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’
In November, Bangladesh scrapped a 2010 law that allowed 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, Yunus’s government appointed a panel of experts to examine major energy deals signed by Hasina. A Bangladesh court has separately ordered a probe of the Adani deal.
Another panel asked to study the economy, and it said in a white paper submitted to Yunus on Dec. 1 that the U.S. charges against Adani meant Bangladesh should “scrutinise” the power deal, which it described as “negotiated hastily.”
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 unaware of the Adani Power deal but 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.
Modi’s office and other Indian officials did not respond to requests for comment.
HARDBALL
On Oct. 31, Adani Power halved the power supply from Godda in response to the payment dispute with Bangladesh.
In a July 1 letter seen by Reuters, the company 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 couldn’t 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 calculating power tariffs, 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 should be carried out in Singapore, but Khan said Bangladesh’s next move would depend 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.
