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8 months ago

Adani power and capacity payments

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Adani Power Ltd, a concern of the Indian business conglomerate Adani Group, is likely to start supplying 750 megawatt electricity to Bangladesh in March next from its Godda coal-fired plant in Jharkhand. The volume is half of the power Adani is obliged to export to Bangladesh under a contract signed with the Bangladesh Power Development Board (BPDB) in 2017.

The power exported by Adani, when available, might prove to be a huge pain in the neck of the troubled BPDB even though it would ease the power supply situation during the summer months.

The purchase of power at a very high rate and capacity payment might trouble the BPDB which will buy power from the Adani plant at Tk 9.06 per kWh. The procurement rate is 56 per cent more than the electricity Bangladesh imports from other Indian sources.

The most striking feature of the deal signed between BPDB and Adani Power is the inclusion of a capacity payment proviso. Under the contract, the latter will be entitled to receive payment from the former against idle capacity. The BPDB does not make any capacity payment in its deals with other Indian firms for the import of 1,160 MW power.

The BPDB has been paying a huge amount of money---the capacity payments to private power plants in the fiscal year 2020-21 stood at more than Tk 250 billion--- for more than a decade.

A report prepared by the Bangladesh Working Group on External Debt has estimated that the country will have to pay more than USD 11 billion as capacity payments to Adani during its 25-year power deal. The annual capacity payment comes to around USD 424 million.

A US-based energy institute, according to a report published in this paper on Wednesday, has found the power being purchased by BPDB from the Adani plant to be 'very expensive' for Bangladesh.

The reason for power being expensive is the use of Australian coal instead of Jharkhand coal by the Adani plant. The high cost of coal has been passed on to Bangladesh. Since the plant is being set up to supply power exclusively to Bangladesh, the proviso for capacity payment has been included in the deal to safeguard Adani's interest.

The present power situation in Bangladesh has one distinctive feature---supply crunch amid surplus generation capacity. It was not so until the recent hike in fossil fuel prices in the wake of the global economic recovery drive and the Russian invasion of Ukraine. The power supply situation was normal before that. Yet many state-owned power plants remained out of operation for gas supply shortages. A good number of privately owned rental power plants were kept idle for unspecified reasons. In the case of non-generation by private plants, the government has been counting a huge amount of money as capacity payments. The issue is widely discussed because of the lack of transparency and accountability in the entire process.

It is no denying that the country needs to ensure an uninterrupted and adequate supply of power for its economy to grow. The government had also prepared a master plan to that effect and revised the same on a couple of occasions.

If the wastage of a large amount of taxpayers' money in the name of capacity payments takes place every year and power is purchased at abnormal costs from both domestic and external sources, it is natural to raise questions about the utility of having a master plan for the power sector.

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