Adani’s Power : A Pandora’s box

Dhaka, November 09, 2024: Bangladesh’s total electricity production capacity exceeds 26,000 MW. However, in summer, production reaches between 13,000 to 15,000 MW, while in winter it drops to 8,000 to 9,000 MW. The highest recorded daily electricity generation so far was on April 19 of last year, reaching 15,648 MW.

The breakdown of total electricity generation capacity in the country is as follows: gas-based power plants account for 44.56%, furnace oil-based plants 21.8%, diesel-based plants 1.04%, coal-based power plants 25.83%, imported electricity 4.17%, solar power 2.17%, hydroelectricity 0.83%, and wind power 0.22%.

A report last year revealed that the 1,320 MW power plant at Payra in Patuakhali, which uses coal, was purchasing coal at $75 per ton. In contrast, the coal price at SS Power in Chittagong’s Bashkhali and the Rampal plant in Bagerhat was below $80 per ton. Adani had initially requested $96 per ton for coal, meaning they wanted to charge $16-21 more per ton compared to Payra and Rampal.

However, after negotiations during the contract signing last year, Adani agreed to reduce the coal price. In a letter dated July 1, 2023, Adani confirmed that the fuel cost for their plants would be kept 0.01 cents lower than the most expensive coal-based plants in Bangladesh, and this price would be adjusted monthly.

In the first three months of this year, Rampal’s power plant generated 68.47 crore units of electricity, with an average production cost of 13.76 BDT per unit. This included an average capacity charge of 6.51 BDT and an average fuel cost of 7.25 BDT.

At Payra, 161.57 crore units of electricity were produced in the first three months, with an average production cost of 12.96 BDT per unit. This included an average capacity charge of 6.84 BDT and an average fuel cost of 6.09 BDT.

Adani Power’s plant has a production capacity of 1,496 MW. In the first three months, Adani incurred a total cost of 3,191.16 crore BDT for fuel, capacity charges, and other operating expenses. The average production cost at Adani’s plant was 14.86 BDT per unit, with a capacity charge of 6.52 BDT, fuel cost of 7.67 BDT, and a variable operation and maintenance (VOMP) cost of 0.67 BDT. Despite this, only 70% of the plant’s capacity was utilized in the first three months.

The average cost of Adani’s electricity, including capacity charge and VOMP, is 14.86 BDT per unit, while the cost at Payra and Rampal is 12.96 BDT and 13.76 BDT, respectively. Adani’s electricity costs 1.90 BDT more per unit than the cheapest coal-based power plants in Bangladesh. While Adani’s capacity charges are lower than those at other coal plants, the higher VOMP charge makes Adani’s electricity slightly more expensive. However, in terms of fuel cost, the difference between Adani’s plant and the Payra or Rampal plants is not significant.

It is noted that Payra and Rampal have been purchasing coal at a 40% discount, and it is expected that Adani should also pay the same discounted price. If Adani is not receiving the discounted price for coal, it would be deemed an unreasonable discussion.

The invoices for coal purchases from Adani can be requested, as the contract stipulates that coal prices would be adjusted monthly. Based on this, the Bangladesh government should have access to information regarding whether Adani is purchasing coal at a discount or at market price.

The issue of Adani overcharging by 3,000 crore BDT emerged when the company reduced its power supply from 1,500 MW to 500 MW in August, citing unpaid dues. Currently, Adani’s outstanding dues amount to around 8,000 crore BDT (approximately 843 million USD). Until now, Adani had been supplying 1,400-1,500 MW of electricity daily, with monthly bills averaging 2,000 crore BDT. After the government’s change following the July protests, Adani has not received any payments, leading to an outstanding debt of 8,000 crore BDT. As a result, Adani has reduced its power supply by a third.

According to the latest reports, a letter of credit worth 173 million USD (2,000 crore BDT) has been opened to settle Adani’s dues. It is expected that Adani will receive one-quarter of its outstanding amount in the next 1-2 days.

Meanwhile, according to the agreement, all the electricity produced by Adani’s power plants, it was intended for the domestic market of Bangladesh, as the Indian government has not granted permission for Adani to supply power within India. This means that until now, Adani’s plants have been entirely dependent on Bangladesh for electricity supply. However, due to delays in receiving payments from Bangladesh, Adani has now requested permission from the Indian government to supply electricity within India. The Indian government has agreed, and Adani will now be able to supply electricity from its plant to the domestic Indian market via a substation in Bihar.

This shift means Adani will no longer be reliant on Bangladesh for electricity supply. Adani, as a businessman, is not willing to continue incurring losses by operating its plant without receiving payments. Whether Bangladesh demands a discount on coal prices or not, or whether outstanding dues are paid or not, Adani will no longer be dependent on Bangladesh for its power supply. The loss of Adani’s electricity supply could soon become a reality for Bangladesh.