NEW DELHI. Bangladeshi authorities have sought to renegotiate an agreement with Adani Power Ltd to import electricity from a thermal power plant in Jharkhand due to the “exorbitant” price of coal, according to a Bangladeshi media report.
The Bangladesh Power Development Board (BPDB) signed a 25-year power purchase agreement (PPA) with Adani Power in November 2017 in Dhaka to supply 1,496 megawatts (MW) of electricity from a coal-based power plant in Godda, Jharkhand.
The BPDB, which oversees the development of Bangladesh’s energy sector, has sent a letter to Adan Power to review the agreement, United News Agency of Bangladesh (UNB) reported, citing unnamed officials. Dhaka’s position on the matter was also conveyed to Adan Power when Bangladesh’s Minister of State for Energy Nasrul Hamid visited the power plant in the first week of January, the report said.
External Affairs Ministry spokesperson Arindam Bagchi, responding to questions on the matter at a weekly media briefing, described the matter as a deal between a sovereign government and an Indian company. “I don’t think we’re involved in that,” he said.
India believes that greater economic integration with its neighbors helps the development process. “We are talking about our neighbors benefiting from India’s economic growth. We have tried to facilitate connectivity, be it physical or energy or power transmission…This is part of our larger strategy of “Neighborhood First”. Within that, we would like to see greater economic interconnections, integration of projects, investments, but if a project doesn’t work for financial or economic reasons, I don’t think it reflects the relationship,” he said.
The UNB report said the BPDB’s letter was a formal request for the agreement to be reviewed and the tariff structure adjusted before Bangladesh could import electricity. The plant is expected to start exporting 750 MW to Bangladesh from March.
“We have sent a letter to the Adani Group after receiving LCs (in India) for coal to be used as fuel for a 1,600 MW plant in Jharkhand,” an unnamed senior BPDB official was quoted as saying. as UNB says.
Adani Power has asked BPDB for a demand release quoting a coal price of $400 per metric ton (MT), much higher than BPDB officials believe the rate should be given the current state of the global market, it said. in the report.
“In our opinion, the coal price they mentioned ($400/MT) is too high. it should be less than $250/MT, which we pay for imported coal in our other thermal power plants,” the official said. , says the UN report.
Since almost all the power from the Jharkhand plant will be exported to Bangladesh, Adani Power needs a demand note from the BPDB to open letters of credit for coal imports. The cost of importing coal, including port-to-station transportation, will be borne by Bangladesh and the price is included in the tariff structure of the power purchase agreement.
The deal has been at the center of controversy in Bangladesh in recent weeks, particularly over the power tariff from the $1.7 billion power plant in Jharkhand, which is higher than Bangladesh currently pays other private power suppliers. Bangladeshi experts have also questioned the lack of a provision in the contract to fix the price of coal, especially when such a provision is included in agreements with other foreign electricity suppliers.
UNB also quoted unnamed BPDB officials as saying that the absence of a “discount clause” in the contract with Adani Power on coal purchases “allowed the Indian company to bill such a steep price for coal”. The report further states that coal for the project will be sourced from Adani’s Carmichael mine in Queensland, Australia.
Officials say Bangladesh will pay Taka 20-22 per unit of electricity from the Adani plant, while power from Bangladesh’s coal-fired plants is below Taka 12 per unit. Officials noted that if the coal pricing mechanism is not regulated, it will be unsuccessful for Bangladesh to import electricity from the Goda nuclear power plant.
The report cited documents from Bangladesh’s Energy Department, which said the country would pay Adani Power about $23.87 billion, or nearly Tk 240,000 crore, over the 25-year cycle of the nuclear plant if the agreement remains unchanged.