Bangladesh’s interim government has accused energy supplier Adani Power of breaching a multibillion-dollar deal by withholding tax benefits for a power plant at the center of a deal it won from New Delhi. Reuters.
In 2017, an Indian company controlled by billionaire Gautam Adani signed a deal with Bangladesh to supply electricity from a coal-fired plant in eastern India. According to Bangladesh Power Agency documents and letters between the two parties, Dhaka hopes to renegotiate the deal, which was awarded without a tender process by then-Prime Minister Sheikh Hasina and costs more than other coal power deals in Bangladesh. ReutersAlso interviews with six officials from Bangladesh.
Dhaka is behind in payments to Adani Power since the start of supply in July 2023. It owes several hundred million dollars for energy it has already supplied, though the two sides dispute the exact size of the bill. Bangladesh’s Acting Energy Minister Mohammad Fauzul Kabir Khan said Reuters The country now had enough internal capacity to cope without Adani supplies, although not all domestic electricity generators were operational.
Nobel Peace Prize winner Muhammad Yunus came to power in August after a student-led revolution ousted Ms Hasina, whom critics accuse of stifling democracy and mismanaging the economy. She ran Bangladesh for most of the last two decades and was a close aide of Prime Minister Narendra Modi. Reuters The first is reporting that the agreement came with an additional implementation agreement that addressed the transfer of tax benefits.
The news agency is also disclosing details about Bangladesh’s plan to reopen the 25-year deal, and it hopes to use the results of US prosecutors indicting Adani and seven other executives in November for their alleged role in a $265 million bribery scheme. For a resolution.
Adani Power has not been accused of wrongdoing in Bangladesh. A company spokesperson said in response Reuters‘ questions whether it had upheld all treaty obligations and there was no indication that Dhaka was reviewing the treaty. The company did not respond to questions about tax benefits and other issues raised by Bangladesh. Adani Group has called the US allegations baseless.
Tax exemptions
Adani Power’s Godda plant runs on imported coal and was built to serve Bangladesh.
The company said the Bangladesh deal furthered its foreign policy objectives and that Delhi had declared the plant part of the Special Economic Zone in 2019. It enjoys incentives like exemptions on income tax and other charges.
According to the agreement and implementation agreement signed between Adani Power and the company on November 5, 2017, the power supplier was required to immediately notify Bangladesh of the change in the plant’s tax status and pass on the “benefit of tax exemption” from the Indian government. State-run Bangladesh Power Development Board (BPDB).
But Adani Power did not do so, according to letters sent by BPDB on September 17, 2024 and October 22, 2024 asking him to pay the benefits.
The contract and letters are not public but have been viewed Reuters.
Two BPDB officials, who spoke on condition of anonymity because they were not authorized to speak to the media, said they had not received a response.
“BPDB has estimated savings of around 0.35 cents per unit of electricity if the benefit is passed,” officials said. The Godda plant would have supplied 8.16 billion units a year by June 30, 2024, according to an undisclosed summary of power purchases seen by the Bangladesh government. ReutersSuggesting potential savings of approximately $28.6 million.
Power Minister Khan said savings will be a major part of future discussions with Adani Power.
‘The talks were hasty’
Bangladesh in November repealed a 2010 law that had allowed Ms. Hasina to award some energy contracts without a competitive bidding process.
“The absence of tenders is unusual,” said Tim Buckley, director of the Australian Climate Energy Finance think-tank, adding that auctions ensure “the best possible price”.
In September, Mr. Yunus’s government appointed a panel of experts to examine major energy deals signed by Ms. Hasina. A Bangladesh court has ordered a separate probe into the Adani deal.
Another panel, asked to study the economy, said in a white paper presented to Mr. Yunus on December 1 that the US allegations against Adani meant Bangladesh should “examine” the energy deal, which it described as “hastily negotiated”.
Ms. Hasina, who has not been seen in public since fleeing India, could not be found. His son and adviser Sajib Wazed told Reuters he was unaware of the Adani Power deal but was “confident there was no corruption.”
Responding to the allegation of political interference, he said, ‘I can assume that the Indian government lobbied for this agreement.
Mr. Modi’s office and other Indian officials did not respond to requests for comment.
On October 31, Adani Power halved power supply from Godda in response to a payment dispute with Bangladesh.
The company said in a letter dated July 1 Reuters The BPDB also rejected a request to extend the concession it had offered until May – resulting in savings of about $13 million for Bangladesh. It said it will not consider further concessions until the payment is cleared.
Adani Power claims that it owes $900 million, while BPDB says it owes $650 million. Bangladesh is suffering from a shortage of dollars and BPBD officials told Reuters that they could not get enough foreign currency for payments. The halving of supply particularly angered Bangladesh, said BPDB chairman Mohammad Razaul Karim, because it came after Dhaka remitted $97 million to Adani Power in October — its highest monthly payment this year.
The dispute revolves around how electricity tariffs are calculated, with the 2017 contract pricing averaging the two indices.
According to Bangladesh’s electricity procurement summary, the unit cost of power from Godda was 55% higher than the average of all Indian electricity sold in Dhaka. Bangladesh is pushing Adani Power to use other benchmarks that would reduce tariffs after revising an index last year, three BPDB sources said.
Adani Power has denied that, one of them said, adding that the two parties will meet soon.
The agreement provides for arbitration in Singapore, but Mr Khan said Bangladesh’s next move depended on the outcome of the court-ordered investigation.
“If it is proved that there is infiltration or irregularity, then the court’s order should be followed if it is dismissed,” he said. ($1 = 119.0000 Taka).
published – December 19, 2024 at 10:41 am IST