Indian businessman Gautam Adani’s power supply company, Adani Power, has decided to proceed to international arbitration to resolve a payment dispute with Bangladesh regarding electricity supply. The information was disclosed in a company statement on Monday, according to a Reuters report.
The statement said that Adani Power has chosen the international arbitration process to settle the payment dispute related to electricity supply to Bangladesh. Under the 2017 power purchase agreement (PPA), the company supplies electricity to Bangladesh. For a long time, Adani Power and the Bangladesh Power Development Board (BPDB) have been at odds over outstanding payments.
Adani Power said in its statement that disagreements exist between the two sides over accounting and billing practices concerning certain cost components. Under these circumstances, both partners have agreed to initiate a dispute resolution process. Both parties are hopeful of a quick, smooth, and mutually beneficial settlement.
However, Fauzul Kabir Khan, adviser to Bangladesh’s Ministry of Power, Energy and Mineral Resources, told Reuters that discussions are still ongoing. He said that after talks conclude, Bangladesh may also proceed to international arbitration if necessary.
Review of Adani Power Contract
In 2017, a 25-year agreement was signed to import electricity from Adani Power’s coal-based power plant located in Godda, Jharkhand, India.
Adani Power’s Godda coal-fired plant supplies electricity to Bangladesh and currently meets around one-tenth of Bangladesh’s total electricity demand.
A Reuters report published last December stated that Bangladesh’s interim government accused the Adani Group of breaching the contract by failing to pass on tax concessions it received from the Indian government.
In the 2023–24 fiscal year, Bangladesh paid Adani 14.87 taka (0.122 USD) per unit of electricity—significantly higher than the average price of 9.57 taka paid to other Indian suppliers.
Last week, Adani Power said its outstanding payment claims from Bangladesh had substantially decreased. By May, dues had fallen to around 900 million USD—down from nearly 2 billion USD earlier in the year. The current outstanding amount is equivalent to about 15 days of tariff payments.
On Monday, the company stated that Adani Power remains committed to the power purchase agreement and will continue supplying reliable, affordable, and high-quality electricity to Bangladesh.
What happened regarding the tax concessions?
The Godda plant runs on imported coal, and all electricity generated there is intended for export to Bangladesh. The company says the agreement supports India’s foreign policy objectives. In 2019, New Delhi designated the Godda plant as part of a Special Economic Zone, making it eligible for incentives such as income tax and other duty exemptions from the central government.
According to a Reuters report published last December, under the 5 November 2017 Power Purchase Agreement and Implementation Agreement between Adani Power and BPDB, any changes to the tax rate of the plant must be promptly communicated to Bangladesh. Adani was also supposed to pass on any tax benefits it received from the Indian government.
However, Adani Power did not do so. BPDB sent letters to Adani Power on 17 September and 22 October last year, requesting price adjustments for electricity supplied to Bangladesh in accordance with the tax concessions. Although these agreements and letters are not publicly accessible, Reuters reported having reviewed them.
Two BPDB officials, speaking anonymously because they were not authorized to speak to the media, said that despite sending two letters, they received no response from Adani Power.
The officials said that if electricity prices were adjusted according to the tax concessions Adani received from the Indian government, Bangladesh would save about 0.35 cents per unit of electricity.
Reuters reviewed a government summary on electricity purchased from the Godda plant. According to the summary, Bangladesh imported 8.16 billion units of electricity from the plant up to 30 June 2024. Adjusting for the tax concessions would have saved Bangladesh around 28.6 million USD.
