Financial constraints due to dollar shortage lead to delays in bill payments
Bangladesh is struggling to pay its $800 million power bill with India's Adani Power Ltd as it grapples with a deepening dollar crisis. Report BDNews24.com
Adani Power, a subsidiary of Adani Group, has pledged to maintain an uninterrupted power supply to Bangladesh despite the mounting dues, according to media reports.
However, the company has urged Bangladesh's interim government to expedite the settlement of these dues as it faces increasing pressure from its lenders for debt repayment, associated with the construction of their power plant in India, the reports said.
Adani Power supplies electricity from its coal-based plant in Godda, Jharkhand, to Bangladesh under a 25-year power purchase agreement with the Bangladesh Power Development Board, or PDB. The plant has a capacity of 1,600MW.
The two parties signed the contract on Nov 5, 2017.
Although the agreement allows for up to 1496MW of electricity, Bangladesh currently receives 700 to 800MW daily, resulting in a monthly bill ranging from $90 to $100 million.
As per the agreement, Sonali Bank is responsible for sending dollars to Adani Group.
Sonali Bank settles these payments using dollars from the reserves of the Bangladesh Bank.
bdnews24.com has seen an email related to this transaction.
According to the mail, Bangladesh Bank approved sending $1,121 million for power bill payments from June 2023 to May 2024.
However, due to the dollar shortage, Sonali Bank has been unable to pay the full amount, leading to an outstanding balance of $476 million. The last partial payment of $3.5 million was sent in December 2023.
As of May, Bangladesh’s outstanding dues have reached $645 million. Adding the amounts for June and July, the total exceeds $800 million.
Mohammad Afzal Karim, managing director of Sonali Bank, told bdnews24.com: “Yes, we are unable to clear all payments at once. We are making partial payments.”
“The dollars earned from remittances and export earnings are insufficient compared to the needs. Still, if necessary, we get dollars from interbank sources to meet the demand,” he added.
The dollar shortage has been a persistent issue for Bangladesh over the past two years, with reserves dwindling to $20.50 billion.
The interim government is seeking an additional $3 billion from the International Monetary Fund, or IMF, to address the crisis.
Sonali Bank’s MD Afzal told bdnews24.com, “The dollars earned from remittances and export earnings are insufficient compared to the needs. Still, if necessary, we get dollars from interbank sources to meet the demand,” he added.
Md Rezaul Karim, chairman of the PDB, told bdnews24.com: “There is only one agreement with Sonali Bank at present. However, Sonali Bank is facing a dollar shortage, which has led to overdue payments for Adani’s electricity bills.
“We are discussing with the governor to see if another bank with better dollar supply can be included in this agreement,” he added.
Former Bangladesh Bank governor Abdur Rouf Talukder had attempted to ensure dollar supply to the market by selling reserves.
However, after the fall of the Awami League government, Governor Ahsan H Mansur reversed this decision and decided not to sell dollars from the reserves.
Sonali Bank's MD Afzal said, “Dollar supply to banks is increasing because remittance flows have risen. Banks will use this revenue to pay government energy and electricity bills.”
Bangladesh Bank spokesperson Mejbaul Haque told bdnews24.com: “The responsibility for paying dollars for these government contracts lies with the banks with which the agreements are made. These banks used to receive support from the reserves due to their dollar shortages.”
A senior official at Bangladesh Bank told bdnews24.com that Adani's power bills have been directly paid from reserves. Due to insufficient dollars at Sonali Bank, they have relied on central bank reserves, which is not ideal at this time.
The power agreement with Gautam Adani should have been reviewed further to determine whether payments should come from reserves or a bank with a stable reserve position, he added.
Zahid Hussain, former chief economist of the World Bank’s Bangladesh office, believes the decision not to provide dollar support to commercial banks from reserves for opening LCs is justified.
According to him, the decision should have been made earlier, given the current state of the forex reserves.
“The level of reserves has decreased to a point where it cannot drop further. To ensure stability, reserves need to be increased,” he added.
A problem was identified in the coal pricing mechanism of Adani's power purchase agreement, which brought the Adani controversy to the forefront.
Energy expert M Shamsul Alam believes that the import of electricity from Adani Power has been controversial from the beginning.
“Electricity is being imported from several other places in India. There, the capacity charge is slightly more than Tk 8, but Adani's electricity costs more than Tk 14. This is excessively high. The reasons for this discrepancy need to be reviewed. The interests of the country and the people should come first. I believe this agreement needs to be reviewed again,” he said.
"If any irregularities or corruption are found, the Adani power deal should be scrapped," he added.
The Godda power project, costing $2 billion, is India’s first commissioned transnational power project.
The power plant began commercial operations in April 2023.
Since June 2023, the plant has been consistently providing power to Bangladesh.
Despite a reduction in net debt and finance costs as of Jun 30, Adani Power saw a significant 55.33 percent decline in net profit for the first quarter of the 2024-25 fiscal year compared to the first quarter of 2023-24.
