How cronyism and kleptocracy dominated Hasina-era power sector
The committee said agreements approved during the Sheikh Hasina rule were designed to consolidate state power through manipulated procurement processes and flawed planning, resulting in massive financial losses for Bangladesh
Highlights
- $1.5bn lost yearly to one-sided power deals
- Committee proposes cancelling Adani deal over unfair terms
- 9,500MW stranded capacity draining public funds
- Crisis 'contractually engineered', not global
- Cronyism entrenched via 2010 power law
- Corruption evidence found, legal action possible
Bangladesh's power sector has been mired in cronyism and kleptocracy, with one-sided deals signed under the 2010 special act draining nearly $1.5 billion annually, according to the National Review Committee formed by the interim government to investigate power contracts.
The committee recommended that the government renegotiate all one-sided agreements. It specifically urged initiating the cancellation process of the Adani Power deal, describing it as one of the most one-sided contracts signed during the previous regime.
Keep updated, follow The Business Standard's Google news channel
The committee also said agreements approved during the Sheikh Hasina rule were designed to consolidate state power through manipulated procurement processes and flawed planning, resulting in massive financial losses for Bangladesh.
With around 9,500 megawatts of stranded generation capacity costing nearly $1.5 billion annually, the committee warned that only a comprehensive renegotiation of "one-sided" contracts could avert a looming fiscal crisis.
In a report released today (25 January), the committee said the country's power-sector distress was not the result of fuel price volatility or global shocks, but of "systematically engineered contracts" that overwhelmingly favoured private investors at the public's expense.
Committee members alleged large-scale corruption during the deals' approval process and said they had uncovered substantial evidence that could form the basis for legal action to cancel the agreements.
The findings were disclosed at a press conference at Bidyut Bhaban in the capital, chaired by Moinul Islam Chowdhury and attended by other committee members.
'Cronyism and kleptocracy'
In his opening remarks, committee head Moinul Islam said the Speedy Power and Energy Act was, in practice, introduced to institutionalise "cronyism and kleptocracy" in the power sector.
"Projects awarded under the Act were non-transparent, opaque, and arbitrary," he said. "This has left the power sector in a highly vulnerable state – indeed, in shambles."
Presenting the core findings, Zahid Hussain, committee member and former lead economist at the World Bank's Dhaka office, said Bangladesh lost an average of Tk50,000 crore in 2015 due to excess generation capacity – roughly equivalent to the cost of building the Dhaka Metro Rail.
"This was done to occupy state power by manipulating procurement procedures and granting undue advantages to local and foreign vested interests," he said.
Zahid added that the public narrative framed the situation as an emergency. "We were told the country needed power at any cost. But in reality, Bangladesh's power-sector crisis was contractually engineered."
According to the committee, what began as a temporary legislative measure – the Quick Enhancement of Electricity and Energy Supply Act, 2010 – eventually became a permanent tool for institutional capture.
"By sidelining competitive bidding and bypassing the regulatory oversight of the energy regulator, the state effectively issued blank cheques to a select group of business interests," the committee said.
'Adani deal monument to governance failure'
The Adani deal isn't just a contract; it's a monument to governance failure, the committee said. Approved without competitive tendering, the agreement carries one of the highest tariffs for imported electricity in the region.
Calling for the initiation of cancellation proceedings against Adani, committee member Mushtaq Husain Khan said whistleblowers from across the world had been invited to submit documents related to Power Development Board contracts, including the Adani deal.
Based on the committee's assessment, electricity imported from Adani Power is 40–50% more expensive than other Indian power imports. "We buy electricity from India's grid at 4.46 cents per unit, yet a deal with Adani was signed at 8.61 cents. By 2025, this rose to 14.87 cents," he said.
Under the Adani contract, at least $25 billion must be paid over 25 years, of which at least 40%, or $10 billion, is excess. This inflated cost resulted from corruption in the deal," he added.
Moshtaq said, "We received concrete evidence indicating that Bangladeshi officials benefited from the deal, including transactions in their foreign bank accounts." However, he added that the committee did not find any foreign transactions linked to the deal in Sheikh Hasina's account.
Asked about the committee's briefing and findings, 5W Communications, which handles public relations for Adani Power in Bangladesh, said it had not received any communication regarding the review committee report, nor had the report been made available to them.
"Therefore, we cannot offer any specific comment regarding the report. At no point were we approached by any Bangladeshi authority to provide our viewpoint or share any inputs," Adani said.
All risks onto the state
The committee noted that the Adani deal is not an isolated case. Solar contracts were signed at rates 70–80% higher than global benchmarks, while heavy fuel oil (HFO)–based plants enjoyed tariffs around 50% above reasonable cost levels.
The committee found that between FY11 and FY24, electricity generation increased fourfold. Over the same period, payments to independent power producers rose elevenfold, while capacity payments surged nearly twentyfold.
"How did this happen?" the report asked. "Through the art of the 'one-sided' contract."
Agreements were structured to be virtually risk-free for investors while transferring all major risks – fuel price volatility, currency depreciation, and political uncertainty – onto the state, the committee said.
Investors were guaranteed payments even for idle plants under take-or-pay clauses. Tariffs were indexed to the US dollar, forcing the government to absorb the full impact of taka depreciation. In effect, taxpayers were locked into paying for power they neither needed nor could use, according to the review panel.
Projects without fuel
The committee, in its report citing the Payra coal-based power plant, said: "A large baseload plant was built alongside major public investment in port infrastructure that lacks the features of a viable deep-sea coal hub, embedding logistics risk into generation capacity."
The Rupsha Plant, another large gas-based facility, was commissioned without assured fuel supply or surplus LNG capacity, leaving technically capable capacity structurally underutilised, the committee found.
"These anomalies did not arise by accident. They were the result of collusion to generate massive excess profits (rents) shared between parties," it said.
In its recommendations, the committee added that much more effective checks and balances are required, including strengthening the Bangladesh Energy Regulatory Commission (BERC).
The panel also recommended establishing a new Energy Oversight Commission of external technical and legal experts to provide independent oversight of BPDB.
