London: India’s second-largest conglomerate has been at odds with the Bangladesh Power Development Board over pending payments for the electricity it supplies as part of an agreement signed by both sides in 2017.

This comes at a time when tensions between Bangladesh and its biggest neighbour rise, following former Prime Minister Sheikh Hasina being sentenced to death in absentia for 'crimes against humanity' by a special tribunal in November.

With disputes dragging on for over a year, Dr Ahsan Mansur, a former International Monetary Fund official and chair of BRAC Bank, now the central bank governor of the Bangladesh Bank, told independent journalist Yusuph Choudhury in an exclusive interview that Adani Power is “charging for the quality of Newcastle [Australian] coal”, but “giving [us] the coal from Indonesia”.

“The government wants a competitive deal that is comparable with international competitors.”

An Adani Power spokesperson explained that the company uses a fuel cost formula that is “actually recommended by the Bangladesh government”. This combines a “blended average of two internationally recognised indices: one from Australia (Newcastle Coal Index) and one from Indonesia (Indonesian Coal Index)”.

Condemning Mansur’s accusations, the firm went on to state that “any allegations of overcharging for coal are unfounded” and that Adani Power’s fuel cost calculations are conducted strictly in accordance with the provisions outlined in the Power Purchase Agreement (PPA) signed in 2017.

Under this agreement, Bangladesh is committed to purchasing electricity from the plant for 25 years.

Debt disputes

The company led by Indian billionaire Gautam Adani threatened to halt flows from its 1,600 megawatt coal-fired Godda plant in Jharkhand over a debt dispute in November last year, citing Dhaka’s unpaid debts of circa $800 million.

This came as the new interim government in Dhaka at the time struggled with a backlog of overdue payments, and sparked a new series of talks between the two parties.

Over one year later, an Adani Power spokesperson confirmed that a deal has not yet been reached, urging the “Bangladesh authorities to liquidate our dues as early as possible for us to operate in a sustainable way.”

“There are significant outstanding payments. The admitted and undisputed dues, including late payment surcharges, are over $250 million, and the disputed amount is also similar, bringing our overall dues to about half a billion dollars.”

Speaking from the central bank’s HQ in Dhaka, Mansur corroborated this, adding that: “There has not been a settlement as of yet.” 

Corruption claims

Separately, the interim government has accused Adani of breaching the PPA by withholding tax benefits from its Godda plant, which meets nearly a tenth of Bangladesh's power needs.

Bangladesh paid Adani a tariff of 14.87 taka ($0.1220) per unit during the fiscal year to June 30, 2024, higher than an average of 9.57 taka for power supplied by other Indian companies.

A committee formed by the Bangladesh government found that organised corruption occurred in the power sector and that irregularities and corruption surrounded the Adani PPA.

A spokesperson responded, claiming that the firm is “fully passing on the benefit of [the] domestic tax status to Bangladesh and [is] fully compliant to PPA provisions” and that the agreement is “in line with standard international practices”.

“We entered into an agreement with Bangladesh for power supply, which we believe is fair and transparent. It was the need of the hour for Bangladesh then to quickly ramp up their power supply sources, and they signed several such PPAs at that time.”

The commodities powerhouse claims that “ongoing plant operations [are] progressively difficult,” citing stakeholders’ ”repeated concerns regarding [Dhaka’s] prolonged delay in payments”. 

Future financing

Adani Power said on November 3 that it has opted for an international arbitration process to resolve disputes over Bangladesh's power supply payments.

Despite this, a spokesperson said that “Adani Power is fully committed to meeting its obligations under the PPA and to supplying reliable power to Bangladesh.”

The group claims that, should any provision of the PPA be subject to differing interpretations, either party has the right to initiate international arbitration to resolve the matter.

However, the Bangladesh high court halted arbitration proceedings in November.

Adani Power said in a statement that while the company was yet to review the order, as per the agreement, disputes between the parties have to be resolved through the Singapore International Arbitration Centre, which is not subject to the jurisdiction of Bangladesh courts.

Yusuph Choudhury is a freelance journalist in London who has contributed to the Financial Times' Banking, Risk and Regulation, and The Banker, as well as The Diplomat and This is Local London on Asian international relations, foreign affairs and global blockchain and crypto.

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