Now Power Division looks back on the multi-billion dollar deals it inked

Several years after inking multi-billion-dollar power purchase agreements (PPA), the Power Division and the Bangladesh Power Development Board (BPDB) only now felt the need to scrutinise the deals to look for loopholes.    

An inter-ministerial review committee, headed by the Power Division Secretary Md Habibur Rahman, sat for a meeting on Monday at the secretariat to analyse coal price mechanism and coal price index of different coal supply agreements and power purchase agreements signed with the public, private and joint venture power companies.

The move by the Power Division came following media reports on the cost of Adani Power plant's coal which is found to be around 60% costlier than other coal-fired plant's coal.

When asked, Md Habibur Rahman told The Business Standard that they have held the meeting to understand the coal business.

"We had a short academic discussion to know how the coal trade happens across the world and how the price of this energy is determined," he added.  

As per the PPA with Adani, the price of coal for the 1,600MW Godda Plant in Jharkhand will "pass-through" meaning Bangladesh will have to pay the market price for coal imports, without any price ceiling or discount provision.

Adani Power recently sent a request for BPDB to issue the demand note, where the coal price is quoted at $400 per metric tonne - far above what BPDB officials believe it should be amid the present state of the global market.

BPDB officials found the Adani quoted price around 60% higher compared to the cost of coal with the same heating value that has been used in the Payra 1,320 MW Thermal Power Plant in Patuakhali.

The cost of electricity of this power plant, which is scheduled to start commercial operation from the first week of March, has been widely criticised by both national and international media.  

Therefore, the state-owned single buyer of electricity, sent a letter to the Adani Group seeking a revision to the existing PPA following the request it received in relation to opening LCs (in India) to import the coal that will be used as fuel for the 1,600 MW plant in Jharkhand.
Meanwhile, the Power Division formed a nine-member committee headed by the Power Division Secretary Md Habibur Rahman.

As per the assignment, the committee is now working to find out the mechanism to keep the coal price competitive and cost effective.

A major mistake: 

In order to consider the coal price for the Adani 1600MW Godda Thermal Plant, a spot market rate was agreed in the signed deal.

Energy Expert Professor Dr M Tamim found this contract a major mistake.

He said spot market rate has been considered for the Adani coal price which is not acceptable for a 20 to 25 year-long contract.

"Now they are trying to revise the contract. But I don't know how much it would be effective because we have to prove that they had a malintention in signing such a deal," he said.  

This once again shows how we are lagging behind in negotiating such a contract, added Dr M Tamim.

"However, any contracts that affect the cost of services and goods have to be scrutinised strictly. Therefore, we should have hired foreign experts who deal with the spot market price, rather than neglecting the issue," he suggested.