Govt seeks revision of deal with Adani Power

The government has sought to revise its power purchase agreement with Adani Power in light of the skyrocketing price of coal.

The development was confirmed by multiple officials of the Bangladesh Power Development Board (PDB), who insisted on anonymity due to the sensitivity of the matter.

The power purchase agreement signed with Adani in November 2017 stipulates that Bangladesh will pay the market price for coal that would be used to fire the power plant in Jharkhand, India, reports The Washington Post, which got three industry experts to review the confidential 163-page agreement.

Other agreements with foreign power suppliers, also seen by The Post, include clauses that would put a cap on the prices Bangladesh pays if the cost of coal skyrockets.

In December last year, the price per metric tonne of Australian coal was $379.2 on average, according to the World Bank commodity price data of January. In 2020, it was $60.8.

The coal for the power plant will probably be supplied by Adani's Carmichael mine in Australia, The Post said.

"Industry analysts say the coal will probably come on Adani ships to an Adani-owned port in eastern India, then arrive at the plant on a stretch of Adani-built rail. The electricity generated will be sent to the border over an Adani-built high-voltage line. Under the contract, shipping and transmission costs will be passed on to Bangladesh," the report added.

The request for the review of the power purchase agreement came after Adani Power sent a request to PDB, which would be buying all the power generated by the plant, to issue a demand note that it can present to Indian authorities to open letters of credit for the coal import.

In the letter, the coal price was quoted at $400 per metric tonne, reports UNB.

"In our view, the coal price they have quoted is excessive -- it should be less than $250 per metric tonne, which is what we are paying for the imported coal at our other thermal power plants," a PDB official told UNB.

The Adani power plant's coal price will be $346 per metric tonne, which is much higher than the amount paid by the local coal-fired power plants, according to a report prepared by the Power Cell in January.

PDB pays $245 per metric tonne for the coal used in the Payra power plant in Patuakhali, $254.38 for the S Alam power plant in Chattogram's Banshkhali and the Rampal power plant in Bagerhat, and $270 for the Barishal 307MW coal-fired power plant.

Save for Payra, all power plants are using coal that has the same 4600 calorific value, the report said.

"This is not an official analysis -- you cannot compare one power plant with another," Mohammad Hossain, director general of Power Cell, told The Daily Star.

One power plant's evacuation cost is high, while another would have high land development costs.

"Since the Adani plant would be importing coal and a dedicated transmission line was built to transport the power, the price is slightly higher than the local coal-fired power plants."

Hossain, however, declined to confirm whether PDB has sought to review the power purchase agreement with Adani Power.

The groundwork for the power purchase agreement was laid by Indian Prime Minister Narendra Modi during the 2015 state visit to Bangladesh, reports The Post.

Modi asked Prime Minister Sheikh Hasina to "facilitate the entry of Indian companies in the power generation, transmission and distribution sector of Bangladesh," according to an Indian foreign ministry readout of their meeting.

"After Modi's trip to Bangladesh, that country's power authority contracted with Adani to build a $1.7 billion, 1,600-megawatt coal power plant," said the report published last month.

For Modi, it was an opportunity to bolster his "Neighbourhood First" foreign policy and promote Indian business, the report said.

But the Indian government now appears to be distancing itself from the deal.

Asked by an Indian journalist about the Bangladesh government seeking revision of the power purchase agreement, Arindam Bagchi, spokesman for the external affairs ministry, said: "I don't have anything on it. I understand you are referring to an agreement between a sovereign government and an Indian company. I am not aware of it. I don't even think we are involved in it."

Replying to a follow-up question by another Indian journalist on Adani Power vis-à-vis the Bangladesh issue, Bagchi said that as part of its larger "Neighbourhood First" strategy, India would like to see greater economic integration and inter-connection with its neighbours, "which assists our process of development".

India wanted its neighbouring countries to benefit from its economic growth through the strengthening of connectivity links and cooperation in the power and waterways sectors, reports our New Delhi correspondent.

"However, if some project is not working for financial or economic reasons, I don't think it is a reflection on the relationship and we will continue our efforts how to bring our two countries closer through greater investment and trade linkages."