Krishi Bank authorised to remit $732m in dues to Adani Power

The Bangladesh Bank has authorised the state-owned Krishi Bank to remit nearly $732 million to India's Adani Power, covering dues from March to October 2024, and to provide a financial guarantee extending until October next year.

The central bank issued the directive on Sunday in a move that could improve power supply from the Indian company.

According to data from the Bangladesh Power Development Board (BPDB), Adani Power (Jharkhand) Limited delivered only 110MW on 9 November and 47MW the next day, despite having a full capacity of 1,496MW.

The BPDB and Krishi Bank confirmed the development regarding the payment, which may help address current challenges in Bangladesh's power supply.

BPDB Chairman Engineer Md Rezaul Karim told The Business Standard, "Primarily due to Sonali Bank's inability to supply dollars as per our demand, we decided to make payments through Krishi Bank. Starting tomorrow (Tuesday), we will begin sending Adani's overdue payments through Krishi Bank."

He said it is not possible to clear such a large payment at once, but the instalment sizes will increase from now on.

"Adani has been paid $15-25 million per month so far, but we plan to pay $100 million or more every month starting in November. Let's see how much the situation permits us," he added.

The BPDB chairman said banks must have the capacity to supply dollars as required, as they also need to manage dollars to settle import bills for many other organisations. "We will endeavour to process payments as quickly as possible," he assured.

At an event in the capital yesterday, Bangladesh Bank Governor Ahsan H Mansur said, "According to reports from various media, there is currently no shortage of dollars in the market. Anyone can obtain dollars from banks if needed. It is not my concern if BPDB cannot arrange the necessary taka for their dollar payments."

When asked whether BPDB is facing a financial crisis, Engineer Md Rezaul Karim replied, "Our funding shortfall is not new; it has been an ongoing issue for some time. However, we are exploring different strategies to overcome this challenge."

The government's outstanding debt in the power and energy sector has reached a record high of nearly Tk50,000 crore, with approximately Tk45,500 crore owed in the electricity sector alone from August last year to October this year. This figure surpasses the current fiscal year's budget allocation by over 30%, according to a Finance Division official.

Each month, new dues of Tk3,500-4,000 crore are added, but with limited revenue collection, the finance ministry has only been able to settle Tk1,500-2,000 crore monthly, the official said on condition of anonymity.

On 3 November, Chief Adviser's Press Secretary Shafiqul Alam said the interim government is working to expedite payments to Adani, which has warned of potential power supply cuts due to unpaid bills.

When contacted, Sanchia Binte Ali, managing director of Bangladesh Krishi Bank, declined to comment on how the bank plans to meet BPDB's dollar demands moving forward.

Instead, she recommended reaching out to the relevant department within the bank. But at the time of writing, no statement was received by TBS from any department of Krishi Bank.

A senior central bank official said Krishi Bank received an average of $110-120 million in remittances during September and October. The bank will need to maintain this level of remittance inflow to make payments to Adani.

Since Krishi Bank has limited export activity, another key avenue for dollar collection, aside from remittances, is interbank transactions. "As a result, we expect Krishi Bank to manage effectively, even if there is some pressure," the official added.

The letter from the central bank to Krishi Bank stated that approval from the appropriate government authority – the Power Division – must be obtained before making dollar payments to Adani.

Additionally, any payment invoices received from Adani must be approved by the BPDB prior to payment. The letter further specified that, if necessary, approval from any other relevant government department or organisation regarding electricity import and payment must also be secured.

Adani meets 10% of Bangladesh's electricity needs. The 25-year power purchase agreement (PPA) with BPDB was signed in 2015.

Adani Group Chairman Gautam Adani had written to Chief Adviser Professor Muhammad Yunus this September, seeking his intervention in the early payment of nearly $850 million of receivables to the power producer.

The company wrote to the BPDB again last month, requesting payment of the dues by 30 October and warning that failure to clear the bills would result in the suspension of the power supply by 31 October under the PPA.

In addition to Adani Power, SEIL, NTPC Ltd, and PTC India Ltd also sell power to Bangladesh.