DHAKA:

Bangladesh’s interim government has accused energy supplier Adani Power of breaching a multibillion-dollar agreement by withholding tax benefits that a power plant central to the deal received from New Delhi.

In 2017, the Indian company controlled by billionaire Gautam Adani signed an agreement with Bangladesh to provide power from its coal-fired plant in eastern India.

Dhaka has said it hopes to renegotiate the deal, which was awarded by then-Prime Minister Sheikh Hasina without a tender process and costs Bangladesh far more than its other coal power deals, according to Bangladesh power agency documents and letters between the two parties, as well as interviews with six Bangladesh officials.

Dhaka has been behind on payments to Adani Power since supply started in July 2023. It owes several hundred million dollars for energy that has already been supplied, though the two sides dispute the exact size of the bill.

Bangladesh’s de facto Power Minister Muhammad Fouzul Kabir Khan said the country now had enough domestic capacity to cope without the Adani supply, though not all domestic power generators were operational.

Nobel peace prize laureate Muhammad Yunus took power in August after a student-led revolution ousted Hasina, who critics accuse of stifling democracy and mismanaging the economy. She ran Bangladesh for most of the last two decades and was a close ally of Indian Prime Minister Narendra Modi.

Reuters reported that the contract came with an additional implementation agreement that addressed the transfer of tax benefits. The news agency is also revealing details about Bangladesh’s plan to reopen the 25-year deal, and that it hopes to use the fallout from US prosecutors’ November indictment of Adani and seven other executives for their alleged role in a $265 million bribery scheme to press for a resolution.

Adani Power has not been accused of wrongdoing in Bangladesh. A company spokesperson said that it had upheld all contractual obligations and had no indication Dhaka was reviewing the contract.

Adani Power’s Godda plant runs off imported coal and was built to serve Bangladesh.

The company said the Bangladesh deal helped further Indian foreign policy objectives and Delhi in 2019 declared the plant part of a special economic zone. It enjoys incentives such as exemptions on income tax and other levies.

The power supplier was required to inform Bangladesh swiftly of changes in the plant’s tax status and to pass on the “benefit of a tax exemption” from India’s government, according to the contract and implementation agreement signed on November 5, 2017 between Adani Power and the state-run Bangladesh Power Development Board (BPDB).

But Adani Power did not do so, according to letters sent by BPDB on September 17, 2024 and October 22, 2024 that urged it to remit the benefits.

Two BPDB officials, who spoke on condition of anonymity because they were not authorised to talk to the media, said they did not receive responses.

BPDB estimates savings of roughly 0.35 cent per unit of power if the benefit was passed on, the officials said. The Godda plant supplied 8.16 billion units in the year to June 30, 2024, according to an undated Bangladesh government summary of power purchases seen by Reuters, suggesting potential savings of about $28.6 million.

On October 31, Adani Power halved the power supply from Godda in response to the payment dispute with Bangladesh.

The company in a July 1 letter seen by Reuters also rejected a request from BPDB to extend a discount it had offered until May – resulting in savings of about $13 million for Bangladesh. It said it would not consider further discounts until payment was cleared.

Adani Power contends it is owed $900 million, while BPDB says arrears are about $650 million. Bangladesh is pressing for Adani Power to use other benchmarks that would lower the tariff after one of the indices was revised last year, said three BPDB sources.

Adani Power has rejected that, one of them said, adding the two sides were meeting soon.

“If it is proven that bribery or irregularities had happened, then we will have to follow the court order if any cancellation happens,” said Khan.