Adani begins to cut off power supplies to Bangladesh

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The Indian conglomerate Adani Group has begun to curb electricity supplies to Bangladesh and threatened to completely shut down power exports as the new government in Dhaka struggles with a backlog of overdue payments.

The infrastructure-focused company owned by billionaire Gautam Adani on Thursday started slashing cross-border electricity flows by as much as half from its 1,600-megawatt capacity Godda coal-fired plant in eastern India, according to data published by Bangladesh’s power grid.

The group has set a November 7 deadline for a full cut-off unless Bangladesh can clarify how it will settle amounts owed to the company, according to a person familiar with the matter.

Adani Group has previously warned that the overdue payments have become “unsustainable”. Its executives told analysts last month that the country owed about $800mn at the end of September.

Muhammad Fouzul Kabir Khan, the top energy adviser to Bangladesh’s interim government led by Nobel Peace Prize laureate Muhammad Yunus, told the Financial Times: “We are both surprised and disappointed at the decision.”

Khan said Bangladesh contested the amounts owed to Adani, saying the government had paid the company about $100mn in October, “double of what we’ve been paying in the earlier months”, and had opened a letter of credit for $170mn. He said Bangladesh now owed about $700mn. The amount, however, could rise as Adani continues to supply the country.

The dispute with the influential Indian tycoon, Asia’s second-wealthiest individual, underscores the vulnerabilities of Bangladesh’s economy after the dramatic ousting of authoritarian prime minister Sheikh Hasina by student protesters in August. Hasina fled to India and her current whereabouts are unknown.

The turmoil disrupted the critical garments sector in south Asia’s second-largest economy, which was already faltering thanks to its reliance on costly fuel and commodity imports.

Yunus’s government has sought an additional $3bn from the IMF following a $4.5bn bailout in 2022. Financing talks are ongoing after officials from the lender visited Dhaka in September and noted economic activity had “slowed markedly”.

Despite the cutbacks by Adani, Khan said Bangladesh was “managing” and had fired up more expensive power generation plants using liquid fuels such as diesel and furnace oil.

“We are forced to run them, which is bringing up the cost of electricity generation . . . we are trying to bring in additional coal-based power,” Khan said. “We’ll be able to manage, but this is not what we expect, because [Adani] are contractually bound to fulfil their commitment, so we’ll look at what contractual options we have.”

Cemented during a 2015 visit by Indian Prime Minister Narendra Modi to Dhaka, the agreement with Adani to supply electricity from its Indian coal power plant in Godda has been criticised by activists, who say the high cost of importing power does not make sense for Bangladesh.

Yunus’s interim government has characterised deals negotiated during Hasina’s 15-year rule as opaque and expensive, heightening Bangladesh’s financial distress.

It has set up an expert committee to re-examine energy agreements signed by Hasina’s administration, and Khan said he expected them to report back in about two weeks.

“They are looking at these deals, and this Adani deal is one of them,” Khan said.

Adani Group did not immediately respond to a request for comment but has previously said the cost of its electricity to Bangladesh was “very competitive” compared with that of other imported coal-fired power plants.

In a filing last month, the conglomerate’s listed power business said it had been receiving payments from the Bangladesh Power Development Board “on a regular basis” and was “confident of recovering the overdue amount”.