Can Bangladesh get out of the Adani power deal?

 As Indian billionaire Gautam Adani’s business empire and its practices have become a subject of intense global scrutiny, Bangladesh, too, seems to be drawn under the scanner. More and more experts are now coming out questioning the rationale behind Bangladesh’s power purchase deal with Adani Power (Jharkhand) Limited (APJL), which many of them have termed as “one-sided” and against the interests of Bangladesh. Amid such controversy, Tawfiq-e-Elahi Chowdhury, adviser to the Prime Minister on energy, while responding to questions from the Indian media recently, said talks with Adani Group on power supply were “private” and “can't be made public.”

It’s unclear whether the prime minister’s energy adviser meant commercial secrecy of the deal or the political compulsion alleged by The Washington Post on December 9, 2022. The question of commercial secrecy is no longer a valid argument, since a number of news organisations have obtained a copy of the contract and experts have published detailed analysis of it. Reviewing the Adani contract, The Washington Post suggested that though the deal appeared unfavourable, not signing it was not an option for political reasons. 

Surprisingly, the Bangladesh government did not respond to the newspaper’s request for comments or protested it’s suggestions after the story was published. This policy of secrecy seems to be maintained strictly, as the government refrains from contesting the claims in the local press that the APJL will be paid almost double the purchase price of power compared to  that paid to Bangladeshi producers and three times the price of other power imported from India at present. These price comparisons are crucial as import of Adani power was in addition to the existing overcapacity.   

Last week, Congress leader Rahul Gandhi, in his speech in Lok Sabha, made similar suggestions when he questioned why Prime Minister Modi’s deal for selling power to Bangladesh became a deal between Bangladesh and the Adani Group. Rahul Gandhi’s attack on Modi's relationship with Adani is nothing new. What’s new, though, is the timing as the Adani Group’s share values and fortune have been bleeding heavily following the allegations of widespread fraud and a number of irregularities by a well-known activist investment firm Hindenburg Research. Hindenburg called it “the largest con in corporate history.”

Well before all this media brouhaha, another serious research pointed out the flaw in the contract and put out a figure of more than one billion US dollar that the Adani would be getting from Bangladesh over its 25-year term. In a joint study, published in June 2022, the Bangladesh Working Group on External Debt (BWGED) and Growthwatch, a voluntary research and advocacy institution in India, said the Bangladesh Power Development Board (BPDB) would have to pay a maximum of $1.17 billion and a minimum of $918.18 million per year to buy electricity from Adani Group’s Godda Power Plant. Of this amount, $423.29 million is the capacity charge per year, which amounts to $11.01 billion over its lifetime, which will only benefit the billionaire Adani Group to make more money. 

Now AdaniWatch, a non-profit project established “to shine a light on the Adani Group’s misdeeds across the planet” claimed that the contract between Bangladesh and Adani may be “legally invalid.” In a co-authored article, Ravi Nair, an Independent Indian journalist, says there are at least two issues which may allow either parties to scrap the deal altogether. According to the Indian’s ‘Guidelines on Cross Border Trade of Electricity, coal-fired power plants owned by private companies would only be allowed to export electricity if they had surplus capacity. AdamiWatch says India still doesn't have power surplus, and bending the rules by the state of Jharkhand to exempt Adani may not be legal. 

It then adds that Adani’s inclusion of costs that appear to be non-existent may allow Bangladesh to claim the deal invalid, too. According to the report, under the contract, the BPDB will have to pay a reference tariff that includes excise duty, customs duty for imported goods, service tax,, krishi kallyan tax, central sales tax, VAT on equipment, composite tax on civil construction, work contract tax, construction workers’ welfare fess, water charges and Income tax. But, four and a half months before the contract was signed, the Indian government rolled out a comprehensive Goods and Services Tax regime, replacing almost all those state and centre’s taxes. Then again in 2019, 15 months after signing the contract, the Godda Power project was declared a Special Economic Zone (SEZ), granting them a lot of tax exemptions. Documents showed the majority of the company’s imports from abroad came after the project was declared an SEZ and the company also avoids paying import duty or any other tax on imported coal. It also doesn’t have to pay GST, surcharges on duties, or any other import duty.

AdaniWatch says the Power Purchase Agreement (PPA) “stipulates that APJL must inform BPDB of any changes in law that might affect these assumptions within 30 days of such an occurrence, and any variation shall be adjusted in the reference capacity price.” Clearly, the PPA was signed without informing BPDB about the changes that hugely cut APJL’s tax liabilities. AdaniWatch asks whether these changes were notified to the other contracting party, and if it wasn’t, the agreement may be legally voided by the BPDB for breach of contract. 

There’s scant public debate in Bangladesh over such a costly blunder, compared to foreign observers and media, despite the fact that it will be the Bangladeshi consumers who will have to carry the burden. Adani Power Ltd, on February 3, 2023, informed the National Stock Exchange of India that its subsidiary, APJL has received a request from the BPDB requesting us to consider a discount on the energy charge as per the PPA, adding that no PPA amendment was under consideration. This latest development suggests the BPDB might do well by demanding scrapping the contract for deliberate breach by Adani to take undue advantage. Or else questions of political compulsion would prove hard to dispel.     

(Published in The DailyStar on February 14, 2023.)