Bangladesh could reconsider energy deals with India – FT 

An outstanding bill of nearly $500 million for energy purchased from India is “threatening an early crisis” for Bangladesh’s interim government, which was sworn in following the resignation of Prime Minister Sheikh Hasina in the wake of violent protests, the Financial Times has reported.

The interim government led by Nobel Peace Prize-winner Muhammad Yunus is set to establish an expert committee to re-examine energy deals negotiated under its predecessor, FT reported, citing Muhammad Fouzul Kabir Khan, an energy adviser to the Yunus administration.

According to the publication, the government blames the country’s mounting financial trouble on “opaque, expensive” infrastructure deals negotiated under Hasina’s rule. These deals include an agreement with Indian conglomerate Adani Group for supply of power from its coal-fired 1600MR Godda plant, located in the state of Jharkhand. The deal was inked in 2015, when Prime Minister Narendra Modi was visiting Dhaka, and the purchase agreement was signed two years later for a 25-year term. The supply of power to Bangladesh began in June last year via a 400 kV dedicated transmission system.  

Khan told the FT that Bangladesh was facing total power liabilities of $3.7 billion and is late on paying nearly $500 million to Adani, which is owed around $800 million in total. He also said the interim government had approached lenders including the World Bank for loans to help stabilize the country’s finances.

Adani Group said it was in “constant dialogue” with the new government in Bangladesh, and has “appraised them of this unsustainable situation where we are meeting not just our supply commitment but also [commitments] to our lenders and suppliers in spite of rising receivables.” 

The conglomerate has stated repeatedly since the political turmoil unfolded in Bangladesh that it would continue to supply power to the country. Adani Power CEO SB Khyalia said the Godda power plant would serve as a “symbol of friendship” between the two neighbors. 

India’s ties with Bangladesh have been strained since the regime change in Dhaka. The political parties opposing Hasina’s Awami League have been pressing the interim government to formally ask New Delhi to extradite the former PM, who has been residing in India since leaving Bangladesh on August 5.

The deal with Adani has been criticized by Hasina’s opposition in Bangladesh and Western think tanks since its inception due to allegedly higher power prices compared to those charged by plants within the country. A report by the US-based Institute for Energy Economics and Financial Analysis (IEEFA) in 2018 claimed that the deal was “too expensive and a poor strategic fit for Bangladesh.” 

The South Asian nation, which has been experiencing high rates of economic growth averaging around 6% for the past decade, has been witnessing severe power shortages. Despite having enough generating capacity (over 24,000 MW versus power demand estimated at around 13,500 MW), many of the country’s power plants were left idle due to rising prices of oil and coal, which the country imports. 

Under Hasina, Bangladesh signed a deal with Russia for the construction of the 2,400 MW Rooppur Nuclear Power Plant, which will generate clean power at a lower cost. The $13 billion plant, financed by Russia, is in the final stage of construction and is expected to be operational next year.

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