Bangladesh’s interim government is now embroiled in a bitter dispute with Adani Power, an energy giant controlled by Indian billionaire Gautam Adani. The disagreement centers on a multi-billion-dollar agreement signed in 2017 to supply power from Adani’s coal-fired plant in Godda, eastern India. The deal, brokered by former Prime Minister Sheikh Hasina without a competitive tender process, has come under scrutiny for its exorbitant cost to Bangladesh and the failure of Adani to honor critical contractual obligations. With mounting arrears, the interim government of Nobel laureate Muhammad Yunus is pushing to renegotiate the terms, citing financial hardship and lack of transparency.
The Deal and Its Flaws
In 2017, Bangladesh entered into a 25-year agreement with Adani Power to secure electricity from its coal-fired Godda plant. The deal, however, was not subjected to the usual competitive bidding process, which raises concerns about transparency and the cost-effectiveness of the agreement. At the time, Bangladesh was facing severe power shortages, and the deal promised to alleviate this issue by importing electricity from India. But now, five years later, Bangladesh finds itself burdened with a deal that is costing far more than other coal-based power agreements.
The lack of transparency in awarding the deal has raised alarms, particularly as the cost of electricity from the Godda plant is significantly higher than the average price of power imported from India. According to documents reviewed by Reuters, the cost of energy from Godda is about 55% higher than the average cost of electricity Bangladesh buys from other Indian suppliers. This discrepancy has fueled widespread dissatisfaction among policymakers and the public, who are now questioning whether the deal was in Bangladesh’s best interest.
Tax Benefits
The core of the current dispute between Bangladesh and Adani Power lies in the company’s failure to honor its tax obligations under the agreement. According to the 2017 deal, Adani Power was required to notify Bangladesh of any changes to the tax status of the Godda plant, particularly the tax exemptions the plant received under India’s special economic zone (SEZ) policy. These exemptions include income tax and other levies, which were meant to be passed on to Bangladesh as a financial benefit.
However, Adani Power failed to disclose these tax exemptions, a breach of the contract that Bangladesh’s power agency, the Bangladesh Power Development Board (BPDB), has repeatedly highlighted in official letters. Despite multiple requests from BPDB, Adani has not responded to calls for the company to remit the tax benefits. According to BPDB estimates, the failure to pass on these benefits has cost Bangladesh nearly $28.6 million in potential savings.
The lack of transparency around these tax exemptions has only added to the mounting pressure on the Bangladeshi government to reopen the deal. The interim government, led by Yunus, is now exploring legal avenues to hold Adani Power accountable for the breach. The government’s hope is that the ongoing U.S. investigation into Adani Group’s involvement in a $265 million bribery scheme could serve as leverage to renegotiate the deal.
Payment Disputes and Power Shortages
As of 2024, Bangladesh is facing a significant arrears problem with Adani Power. Since the commencement of power supply in July 2023, Bangladesh has failed to make full payments for the electricity received. Both parties dispute the exact amount owed, with Adani Power claiming it is owed around $900 million, while BPDB estimates the arrears at $650 million. The situation has worsened as Bangladesh struggles with a dollar shortage, which has made it difficult for the country to meet its international obligations, including payments to Adani.
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In an attempt to exert pressure on Dhaka, Adani Power halved its power supply from Godda in October 2024, citing the unresolved payment issue. The reduction in supply has exacerbated power shortages in Bangladesh, particularly since domestic power generation capacity has not been fully optimized. BPDB Chair Md. Rezaul Karim expressed frustration over the reduction in supply, noting that it came despite Bangladesh’s remittance of $97 million to Adani in October, its highest monthly payment to date.
Bangladesh’s Response: A Call for Renegotiation
In light of these issues, Bangladesh is determined to revisit the terms of the Adani Power deal. Muhammad Fouzul Kabir Khan, the country’s interim power minister, stated that Bangladesh now has sufficient domestic power generation capacity to cope without relying on Adani’s supply, even if not all domestic plants are fully operational. Bangladesh is also pressing for a reduction in the energy tariffs charged by Adani Power, which are disproportionately high compared to other power suppliers in the region.
The interim government has formed a panel of experts to examine all major energy contracts signed under Sheikh Hasina’s administration, including the Adani deal. This panel has already raised concerns about the lack of a competitive bidding process and has questioned whether the deal was negotiated in haste. With the country’s future energy security at stake, the government is determined to secure a more favorable agreement.
The Political Context
The political backdrop to this dispute is also critical. In August 2024, Bangladesh’s long-time leader Sheikh Hasina was ousted following a student-led revolution, and Muhammad Yunus assumed power. Hasina’s government had a close relationship with Indian Prime Minister Narendra Modi, and many critics accuse her of mismanaging the economy and stifling democracy. Yunus, a Nobel laureate, has promised to restore democratic governance and prioritize the public interest, which includes revisiting controversial deals like the Adani Power agreement.
Yunus’s government is now taking a hard stance on this issue, hoping to renegotiate the terms of the deal and hold Adani accountable. If it is proven that bribery or irregularities played a role in the agreement, the government has pledged to take legal action and potentially cancel the contract.
The ongoing dispute between Bangladesh and Adani Power reflects broader issues of transparency, accountability, and fairness in international business agreements. As Bangladesh navigates this complex and high-stakes situation, the outcome of this dispute will not only affect the country’s energy future but also set a precedent for how similar deals are handled in the future. The struggle to renegotiate the terms of the Adani deal is not just about money—it is a battle for fairness, transparency, and the right to secure a better future for the people of Bangladesh.