Power export to Bangladesh: Adani proposes 60pc higher in coal price

Indian business conglomerate Adani Group has proposed a higher price for the coal imported for the power plant meant to produce electricity for Bangladesh.

If the proposal gets final approval, Bangladesh has to pay a higher price for importing electricity from the plant.

According to the power division sources, the Adani Group informed the power development board (PDB) that it is interested in opening a letter of credit (LC) for importing coal for the power plant, at a price of USD 400 per tonne.

The figure is around 60 per cent higher than the price of coal imported for Rampal and Payra power plants in Bangladesh. The per tonne price of coal imported for the Rampal power plant, a joint venture of Bangladesh and India, and the Payra power plant, a joint venture of Bangladesh and China, was USD 250.

The PDB, however, has dissented from the proposal and wrote to the Adani Group at the end of January, asking it to send a delegation to discuss the issue. The power division sources claimed that the Indian exporter has agreed in principle to review the coal price and a delegation is expected to visit Dhaka soon.

Adani Group set up the coal-fired power plant in the Godda district of Jharkhand state in India. Bangladesh will be the lone buyer of the 1600-megawatt power plant for the next 25 years. The plant is likely to commence electricity supply to Bangladesh in March.

But the PDB is still in a tight corner over fixing the coal price at the power plant. A high price of coal will eventually push up the price of electricity generated in the plant.

Bangladesh does not want to increase the coal price by a big margin, from the price of Rampal and Payra power plants.

In its letter to the Adani group, the PDB said Adani should buy coal at the price of Payra and Rampal power plants. The price should not be much higher than the two plants.

Power division secretary Habibur Rahman said the coal price in the Adani power plant will not be higher than Payra and Rampal. They agreed in principle and the issue will be decided before the commencement of the power purchase. A technical team of the Adani Group will visit here to discuss the issue.

Bangladesh currently has a daily power generation capacity of 22,700 megawatts when the maximum volume of generated power was recorded at 14,782 megawatts on 16 April 2022.

Many power plants are lying idle in the country, but are receiving capacity charges from the government as per their agreements. The annual capacity charge paid by the government to the power companies totals over Tk 200 billion.

After taking charge in 2009, the Awami League government laid emphasis on increasing the power generation capacity and made massive investments in power plants. It also took the initiative to import electricity from India and the country is now all set to receive 1600 megawatts of electricity from the neighbouring nation.

Adani signed a deal with Bangladesh in 2017 and started constructing the power plant in Jharkhand to supply electricity as per the deal.

Adani Group is very familiar in India to be associated with the incumbent BJP government. Rahul Gandhi, leader of opposition party Indian National Congress, slammed prime minister Narendra Modi in a Lok Sabha session on Tuesday, pointing at the deal with Bangladesh.

Rahul Gandhi said the premier (Narendra Modi) went to Bangladesh on his maiden foreign trip and a decision was taken to export electricity there. Adani made a long-term deal with the PDB in Bangladesh.

Meanwhile, the issue heated up a parliamentary session in Bangladesh on Tuesday. Mujibul Haque, secretary general of opposing Jatiya Party, raised question over the decision to buy electricity from India’s Adani Group at a higher price.

Earlier, the spokesperson of the Indian foreign ministry, Arindam Bagchi, told a press briefing on 2 February that the power export deal is between a sovereign government and a private company. He thinks the Indian government has nothing to do here.

On 9 December, US daily The Washington Post raised questions over the power purchase agreement between Bangladesh and Adani Group.

The PDB makes the power purchase deals with the authorised power plants. The deals do not mention the per unit price of electricity but contain a formula to fix the capacity payment of the plants. And operating and fuel costs vary during power generation at the plants.

The plants purchase the fuel themselves, but the PDB pays the price later as per the receipt during payment of the electricity price. The electricity price rises when the fuel price soars.

The Australian Newcastle index and Indonesia coal price index are generally taken into account while determining coal prices. Australia and Indonesia are two coal exporting giants and their price indices are available online and followed globally.

Insiders said there are some special discounts behind the announced prices on the basis of contemporary context.

Three responsible officials of the power division and PDB said the coal price at the Adani plant will be fixed as per the average of Australian and Indonesian indices. The two indices remain almost the same. However, the Australian index shows the current coal price to be higher by USD 100 per tonne, in comparison to the Indonesian index.

The officials said Adani may claim an increased price as per the current average of both indices, or may seek the announced price, rather than the discounted one. This is why they are interested in settling the issue before commencing power generation.

The concerned persons also said the power purchase agreement with Adani was hastily signed in 2017 under the direction of the power division. The PDB could not verify the coal price accurately as no imported coal-based plants were in operation here. It had to rely on Adani’s own coal mine and its experience in building several coal-fired power plants in India.

The Payra and Rampal power plants went into production in 2020 and the PDB has now gathered an idea about coal imports.

Two PDB officials said there is a joint technical committee to oversee various issues, including the implementation of the agreement and its progress. The issue of coal price was placed before the committee during its quarterly meeting on 12 January, but the Adani officials did not comment on the issue.

They rather said it is beyond the jurisdiction of the committee and suggested writing to Adani Group for further discussion. Later, the PDB sent a letter to Adani at the end of last month.

On the condition of anonymity, a responsible official of Adani told Prothom Alo that there have already been two phases of discussions with PDB regarding the coal price. Adani Power has agreed in principle with the PDB demands and is preparing to send a delegation to Bangladesh. He also said there will not be much difference between the prices of coal used in the Adani power plant and other power plants in Bangladesh.

Meanwhile, the transmission line has been set up to bring Indian electricity, but the work of the substation is yet to be finished.

Two officials of the power grid company of Bangladesh (PGCB) said they conducted a trial of power supply on 16 December using a temporary substation. Also, 100 to 150 megawatts of electricity are being supplied occasionally from the Adani plant. However, two substations will be okayed within the current month.

The people and factories have suffered from load shedding due to the fuel crises in the plants, though the country has a high power generation capacity.

There are concerns over the power supply during the forthcoming summer. The government assured that there will be no crisis as Rampal plant will soon go into production in full swing and the electricity supply from Adani plant will commence in March.

The question is whether Adani's coal-based power will be affordable or not. Another question is what will be the capacity payment if the Adani power plant remains idle. And what will be the capacity charge if the local plants remain unproductive due to the imported power?

Muhammad Fouzul Kabir Khan, former power secretary, said such contracts are usually signed in haste. The coal price should have been verified duly at the time of signing the agreement.

Even if the PDB does not take electricity due to the high coal price, it has to pay the capacity charge to Adani, he added.

The former secretary categorically said the provision of capacity charge is not justified at all as there is an opportunity to sell electricity in the open market in India.

There has been no sustainable development in the power sector, he noted, adding a bit of load shedding is better than taking the electricity price out of the consumers’ affordability.