Adani Power and high cost of its electricity

The cost of keeping the lights on in Bangladesh is drawing ever more intense scrutiny, especially over electricity imported under the agreement with Adani Power. In early May, Adani Power's Chief Financial Officer Dilip Jha disclosed that Bangladesh owes approximately $0.9 billion for electricity supplied from the 1,600 MW Godda Plant in India's Jharkhand state. This follows a $1.2 billion payment made to Adani just last November. By June, the outstanding amount is projected to reach $1.3 billion, once again placing considerable pressure on the country's foreign currency reserves and raising serious questions about the wisdom of the deal.

One reason why the dues are mounting so quickly is the steep late payment fee, which reportedly stood at $136 million as of May 2025, accruing at an interest rate of 2.0 per cent per month. That's nearly 27 per cent annually, making it a penalty five times higher than typical global borrowing costs. With reserves already depleted to just over $20 billion following recent international payments, it is getting increasingly difficult for Bangladesh to sustain such costly terms.

The core issue, however, lies in the inflated cost of electricity itself. In fiscal year 2023-24, Bangladesh Power Development Board (BPDB) paid an average of Tk 14.87 per kilowatt-hour (kWh) to Adani, totalling over Tk 121 billion or around $1.0 billion. In contrast, other Indian suppliers charged significantly lower prices. NVVN Ltd charged around Tk 8.07 per kWh, Sembcorp Energy India Ltd Tk 10.42 and PTC India Ltd Tk 9.28. This puts Adani's tariff at least 30 per cent higher than comparable suppliers. The discrepancy becomes even more pronounced when compared to domestic projects such as the 1,200 MW Matarbari Coal-Fired Power Plant in Cox's Bazar, which has agreed to sell power to BPDB at just Tk 8.45 per kWh.

In a country where public subsidies are required to keep retail electricity prices affordable, such inflated import prices are hard to justify. Subsidising overpriced electricity drains public funds and distorts budget priorities, yet the government has little choice if it wants to avoid public backlash over higher retail electricity prices. Amid these concerns, the High Court in November last year ordered the formation of a committee to review the terms and conditions of the power purchase agreement with Adani. A three-member committee was reportedly formed in response, but its findings are yet to be made public.

The over-reliance on imported electricity also raises strategic considerations. Energy is a strategic asset, and dependence on a single foreign supplier under restrictive and lopsided conditions leaves Bangladesh exposed to serious geopolitical and economic vulnerabilities. It is not hard to see how Europe paid a heavy price for its dependence on Russian gas after the invasion of Ukraine, for instance.

Bangladesh has relied heavily on energy imports in recent years, often out of necessity. But that necessity is quickly diminishing. A number of domestic energy projects including gas, coal, solar and the Rooppur Nuclear Power Plant is set to transform the country's energy mix. Rooppur alone will add 1,200 MW of nuclear capacity by late 2025. Several existing plants are also operating below capacity due to fuel supply or grid issues, not for a lack of infrastructure. This changing situation makes it both necessary and possible to revisit past deals signed under very different conditions.

The Adani agreement is particularly troubling not only because of high cost, but also for its lack of transparency. Under the PPA, Adani Power was required to disclose any tax exemptions granted by the Indian government. However, BPDB officials have reported that Adani failed to inform them about a key regulatory change. In February 2019, India amended its Special Economic Zone (SEZ) policy to grant tax-free status to Adani's Godda plant for electricity exports. This benefit was never passed on to Bangladesh which constituted a breach of contract and a serious lapse in disclosure. Had Bangladesh been informed, it could have pushed for a lower tariff to reflect Adani's reduced operating costs. Instead, the country not only overpaid for electricity but also ended up subsidising a foreign company's tax advantage.

Given the scenario, Bangladesh has a strong case for renegotiating its agreement with Adani Power. Although the contract reportedly contains strict conditions for termination, this only makes renegotiation more urgent. An unfavourable deal does not mean it is unchangeable. In international business, new information and changing circumstances, especially failures to disclose key terms, can provide legitimate grounds for reopening agreements. Doing so, however, requires political will and strategic foresight. The BPDB's approach to Adani Power should be that of a sovereign entity protecting its economic future, not merely a passive debtor. The renegotiation efforts should also prioritise all three demands: lowering per-unit cost, softening late payment penalty and adjusting tax-sharing terms in light of exemptions granted to Adani by the Indian government.

Bangladesh need not enter this process from a position of weakness. The Matarbari agreement with the Coal Power Generation Company of Bangladesh Ltd (CPGCBL) provides a clear and relevant benchmark. If a domestic plant using imported coal can offer electricity at Tk 8.45 per kWh, there is little justification for paying nearly twice that amount for similar energy from across the border. Furthermore, Bangladesh's growing domestic capacity means that the country will soon have the option to reduce its reliance on external suppliers. This shift in energy self-sufficiency strengthens its negotiating hand.

Globally, many countries are rethinking their energy strategies in the face of fossil fuel depletion. China, the UAE, the United States and even India are expanding their nuclear power infrastructure. Nuclear power offers long-term stability and low running costs, advantages Bangladesh must make the most of through Rooppur and future projects. A forward-looking energy policy should focus on building domestic and sustainable sources, not tie the country to expensive and rigid deals born of short-term need.

The deal with Adani Power does not have to remain a long-term burden. With a clear strategy, Bangladesh can push to revise the deal, protect its economy, and make better use of its public funds.

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