Adani Power moves to international arbitration over payment dispute with Bangladesh

Adani Power, owned by Indian industrialist Gautam Adani, has decided to take its payment dispute with Bangladesh to international arbitration. The company said in a statement on Monday, November 3 that it has opted for arbitration to resolve the dispute with the Bangladesh Power Development Board (BPDB), according to a report by Reuters.

The statement said there were disagreements between the two parties regarding cost calculations and billing processes in certain areas. Under the circumstances, both sides agreed to resolve the issue through international arbitration. Adani Power stated that it hopes to reach a quick and mutually beneficial solution.

On the other hand, Faozul Kabir Khan, adviser to Bangladesh’s Ministry of Power, Energy and Mineral Resources, told Reuters that discussions are still ongoing. If unresolved, the matter will proceed to international arbitration.

In 2017, Adani Power and BPDB signed a 25-year power purchase agreement (PPA). Under the deal, electricity is supplied to Bangladesh from the coal-based power plant located in Godda, Jharkhand, India. The plant currently meets about 10 percent of Bangladesh’s total electricity demand.

Last December, Reuters reported that Bangladesh’s interim government accused the Adani Group of breaching the contract by not passing on tax benefits it received from the Indian government to Bangladesh.

In the 2023–24 fiscal year, Bangladesh paid Adani Power at a rate of Tk 14.87 (about USD 0.122) per unit of electricity, which is higher than the average price of Tk 9.57 paid to other Indian suppliers.

Recently, Adani Power said its outstanding payments from Bangladesh have dropped significantly — from around USD 2 billion at the beginning of the year to about USD 900 million in May. The company said current dues are equivalent to roughly 15 days of billing.

In Monday’s statement, Adani Power reaffirmed its commitment to the power purchase agreement and pledged to continue supplying reliable and affordable electricity to Bangladesh.

The Godda Power Plant runs on imported coal, and all electricity produced there is exported to Bangladesh. In 2019, the Indian government declared the plant a Special Economic Zone (SEZ), granting it exemptions from income tax and other duties.

According to Reuters, the 2017 contract required Adani Power to inform Bangladesh of any changes in tax rates or exemptions and to share the benefits accordingly. However, the company failed to do so.

Officials told Reuters that in September and October 2023, BPDB sent two letters requesting price adjustments in line with tax benefits, but Adani did not respond.

According to BPDB calculations, if the tax exemptions were adjusted, the price per unit of electricity would have been reduced by 0.35 cents. Consequently, Bangladesh could have saved about USD 28.6 million on electricity purchased from the Godda plant by June 30, 2024.