Bangladesh has been paying around $400–500 million a year to India’s Adani Power, roughly 50 percent more than it should for electricity purchase, found the national committee to review power sector deals.
The prices for electricity from the plant increased over time, and the rise in costs was much higher than in similar contracts with other local coal-based power plants.
When the plant was approved in 2017, the per kilowatt-hour (kWh) price was set at $0.0861 -- the highest initial tariff between its peer plants -- and now costing $0.149 per kWh, the report said.
The Adani contract commands a 39.7 percent premium over its nearest private-sector competitor and a 2.7-fold cost multiple over legacy public-sector contracts.
“This divergence was driven not by operational inefficiency, but by the interaction of fuel pass-through, exchange-rate indexation and the spreading of fixed capacity charges over lower-than-anticipated dispatch volumes.”
The committee found substantial documents that could prove corruption in the deal in any court, said Mushtaq Khan, professor of economics at the UK’s SOAS University and a member of the national committee.
“The structure of this contract is such that it could itself be considered initial evidence of corruption. Under international law, the irregularities in a contract often indicate the presence of corruption -- because no prudent official or politician would normally sign such an agreement.”
The committee has identified at least six officials of the Prime Minister’s Office and the power division who directly benefited from the deal, Khan added.
The report mentioned different letters between Adani Power and the then government high-ups before the deal was signed.
Cancelling the deal is a political decision, said Khan at a press conference yesterday.
“Whichever government comes to power after the national election must make a clear commitment now that full legal and institutional action will be taken regarding the Adani contract.”
However, challenging this contract could lead to short-term electricity shortages and load-shedding.
“The public must be mentally prepared for this -- accepting six months to a year of hardship in order to free the country from a 25-year burden will ultimately be better for the nation in the long run,” he added.
The project was approved through an unsolicited process without open tendering, systematic benchmarking or transparent documentation of value-for-money considerations.
The power purchase agreement incorporated a number of highly unusual provisions, including full pass-through of Indian corporate taxes into the Bangladesh tariff, gross up clauses insulating the sponsor from Bangladeshi withholding taxes and political-event clauses that expose the Bangladesh Power Development Board (PDB) to tariff escalation linked to regulatory or policy actions by the Indian government, the report said.
In 2015, the power division approved the signing of two memoranda of understanding (MoU) between the PDB and Adani Power to build a power plant in India and another in Cox’s Bazar.
Subsequently, one MoU was signed only for the establishment of the power plant in India. However, no detailed feasibility studies were conducted to address why the power plant was not established in Maheshkhali or the reasons behind the establishment of the power plant in India’s Jharkhand.
“It was already known at that time that a coal-based power plant in India that would only sell power to Bangladesh would have to use imported coal and could not use the much cheaper Indian coal. This undermined any advantage of locating the plant in India as opposed to Bangladesh as both would use imported coal.”
In addition, the plant would have the extra cost of transmitting the power to Bangladesh over a long distance. And Bangladesh would have great difficulty in valuing coal used in Jharkhand as it would not be imported into Bangladesh.
