India’s Adani Group threatens to cut off power supply to Bangladesh over payment dispute

In a critical development impacting cross-border energy flows, India’s Adani Group has reduced electricity supplies to Bangladesh by up to 50% from its 1,600-megawatt Godda coal-fired plant, threatening a full suspension of power exports if overdue payments are not resolved. The conglomerate, owned by billionaire Gautam Adani, has set a deadline of November 7 for Bangladesh to clarify its payment plan, according to sources familiar with the matter.

The ongoing payment dispute has escalated in recent months, with Adani Group citing “unsustainable” levels of overdue amounts. Adani executives revealed that Bangladesh owed approximately $800 million at the end of September, a burden further highlighted in discussions with analysts last month.

Bangladesh ‘surprised and disappointed’

Muhammad Fouzul Kabir Khan, top energy adviser to Bangladesh’s interim government led by Nobel Peace Prize laureate Muhammad Yunus, expressed dismay over the move. “We are both surprised and disappointed at the decision,” Khan told the Financial Times. He confirmed that Bangladesh had recently paid $100 million in October, double the usual amount, and opened a letter of credit for $170 million, reducing the outstanding debt to around $700 million.

Khan asserted that Bangladesh was managing the situation by activating alternative, more expensive power generation sources, including diesel and furnace oil plants. “We are forced to run them, which increases the cost of electricity generation,” he noted. Khan emphasized Bangladesh’s contractual expectations from Adani, indicating potential exploration of legal recourse.

Yunus govt re-examining high-cost energy deals

The contractual relationship between Adani Group and Bangladesh, established during Indian Prime Minister Narendra Modi’s 2015 visit to Dhaka, has been criticized for imposing costly terms on Bangladesh. Amid the recent economic upheaval following Prime Minister Sheikh Hasina’s ousting by protesters in August, Yunus’s interim government has begun re-examining high-cost energy agreements, including the Adani deal, which critics say exacerbates the country’s financial strain.

Meanwhile, Bangladesh continues to seek additional funding from the International Monetary Fund (IMF) to stabilize its economy, having already secured a $4.5 billion bailout in 2022. The IMF noted in a September review that Bangladesh’s economic activity has “slowed markedly.”

Adani Group clarifies stance

Amid the tension, Adani Group has clarified its stance, countering reports that it demanded full payment within seven days. In a press statement, Adani reaffirmed its cooperation with the Bangladesh Power Development Board (BPDB) to resolve the matter, dismissing claims of immediate repayment demands, reported the United News of Bangladesh (UNB)

The Indian Ministry of External Affairs underscored that the dispute remains a bilateral issue between Adani and the BPDB, stating, “This issue is between two parties: one is a private organization, and the other is the government of Bangladesh. The government of India has no role in this contract,” the UNB added.

As of Friday (Nov 1), Adani’s Godda plant in Jharkhand, India, supplied only 724 megawatts out of its 1,496MW installed capacity, exacerbating power shortages in Bangladesh. The BPDB’s attempts to facilitate a letter of credit via Krishi Bank to cover the overdue amount reportedly failed to meet the terms stipulated in the power purchase agreement.

With the November 7 deadline approaching, all eyes are on Dhaka to see how it will address the outstanding payments to Adani, as further reductions in power supply could intensify the energy crisis and strain Bangladesh’s fragile economy.