Adani finally agrees to sit over power purchase disputes

Infographic: TBS

In a breakthrough, Adani Power Limited has proposed to the Bangladesh Power Development Board (BPDB) to resolve the disputed clauses in the Power Purchase Agreement (PPA) with the Indian conglomerate.

The proposal was made by the chief executive officer of Adani Power, Shersingh B Khyalia, on Thursday during a meeting with the BPDB chairman, Md Rezaul Karim, in Dhaka.

Bangladesh had expressed concerns about the disputed clauses in the PPA long before the Adani Group-owned 1600 megawatt Godda power plant in India started supplying electricity to Bangladesh. 

Sources at the Power Division and BPDB told The Business Standard that, in reply to Adani's proposal, the BPDB chairman responded positively, saying, "We will sit and let you (Adani) know later on."

Talking with TBS on Saturday, the BPDB chairman acknowledged receiving the PPA renegotiation proposal from Adani Power.

The deal was signed in 2017 to supply electricity to Bangladesh from the 1600MW Godda power plant for 25 years.

Rezaul said, "In the words of Shersingh B Khyalia, we both parties (Adani and BPDB) agreed to solve the disputes in PPA by sitting together."

He continued, "Adani Power Ltd made this proposal to us. We said ok, we will let you know about your proposal."

Bangladesh had consistently disputed some of the clauses in the PPA even before the power plant came to commercial operation on 7 April 2023, but could not bring Adani to the discussion table.

This proposal came at a time when a government committee is scrutinising the Adani deal and is supposed to soon place recommendations to BPDB about the course of action to renegotiate the Adani deal. 

TBS learned that the review committee finalised its recommendations to renegotiate key clauses in the Adani Power deal – tax rebates, excessive late payment surcharges, and skewed coal pricing.

Earlier on 9 March, TBS reported that the government body wants to renegotiate three clauses in the PPA agreement with Adani.

Replying to a query of when the BPDB can start renegotiation with Adani Power, the BPDB chairman said, "A review committee is working on the Adani deal. We are not coming to any specific discussion with Adani now. We are waiting for the directives of the review committee. By this time, we are doing our groundwork, and then we will start renegotiation with Adani," he added.

After landing at the Shahjalal International Airport in a jet plane, the Adani team, led by Shersingh B Khyalia, headed straight to a meeting with the BPDB chairman and later made a courtesy call with Power Division Secretary Farzana Mamtaz and left Dhaka quietly. 

Long-standing disputes

Bangladesh had long complained that Adani Power was not giving some major tax benefits, like tax exemption, to Bangladesh and charging exorbitantly on late payment and accounting coal prices by doing deals outside the indexing. 

The committee, formed by a High Court directive, also found that in the Adani deal, tax exemption clauses disproportionately benefit Adani, and for late payment, Adani is charging 27% annually.

In 2019, the Modi government amended Special Economic Zone (SEZ) rules to designate the Godda power plant as an SEZ and granted Adani nearly $1 billion in carbon tax reductions over 25 years, plus 100% income tax exemption for five years, 50% for the next five, and 50% on ploughed-back export profits for another five.

The BPDB is complaining that those benefits were not given to Bangladesh because of different wordings and conditions in the PPA, despite being agreed upon in earlier documents. 

Adani Power began commercial operations on 7 April 2023, exporting 750MW of electricity.

The BPDB raised the tax benefit issue with Adani three times in 2024: first on 17 September, then on 22 October, and again on 4 December.

Adani softens stance on due payment

During the meeting between the BPDB and the Adani team, a discussion was also held on the due electricity bills owed by Adani. 

In the meeting, Adani showed flexibility to settle due bills in line with the BPDB's accounting and urged the BPDB to clear dues as early as possible, confirmed a Power Division official.

According to BPDB accounting, as of April, Adani Power owes $562.09 million. 

A source at Adani's Dhaka office said the BPDB assured them of clearing the bills by December, subject to allocation from the Finance Division, which was, however, disputed by the BPDB chairman.

Rezaul Karim said, "We didn't give them any specific timeframe to pay all their dues. But Adani said, 'your (BPDB) payment system is now good, but try to speed up the process of payment so that our dues come to breakeven.'"

Quoting an Adani official, the BPDB chairman said, "Our payment has remained outstanding for a long period."