Two senior officials at the power division and PDB told Prothom Alo that in all other power plants, actual coal procurement cost is used when calculating expenses. But under the power purchase agreement with Adani, the cost has to be determined by averaging prices from the Indonesian and Australian indexes. Because of this averaging rule, Adani gets an opportunity to claim a higher coal price.

Despite multiple rounds of discussions, the dispute between Bangladesh and India's major business conglomerate Adani Group over coal prices remains unresolved.

Several meetings have taken place between the two sides, but Adani has refused to make any concessions beyond the terms of the existing contract. The company may take the matter to an international arbitration court. Adani has already appointed legal counsel, according to sources within Bangladesh’s Power Division, which has also been confirmed by an Adani representative. In response, the Power Division has begun preparing for a potential legal battle.

Speaking to Prothom Alo on the issue, power, energy and mineral resources adviser Muhammad Fouzul Kabir Khan said, "Discussions are ongoing with Adani, but they are leaning toward arbitration. The first step, a CEO-level meeting, has already taken place. The second step—appointing a mediator—has not yet happened." "If Adani moves toward arbitration, we must be prepared. That’s why we’re preparing to appoint experienced international lawyers," he added.

2 years of dispute

Adani’s coal-based power plant, located in Jharkhand, India, has a capacity of 1,600 megawatts. In 2017, the Bangladesh Power Development Board (BPDB) signed a power purchase agreement with Adani Group. Under the agreement, Bangladesh is committed to purchasing electricity from the plant for 25 years.

Commercial production of electricity from the Adani plant began in 2023. According to the agreement, the electricity price is to be determined based on coal prices and other factors. However, a dispute over coal pricing arose during the tenure of the previous government, with Bangladesh consistently claiming that Adani is overcharging for coal.

Commercial production of electricity from the Adani plant began in 2023. According to the agreement, the electricity price is to be determined based on coal prices and other factors. However, a dispute over coal pricing arose during the tenure of the previous government, with Bangladesh consistently claiming that Adani is overcharging for coal.

Coal prices are generally determined based on the Australian Newcastle Index and the Indonesian Index. However, insiders note that coal can often be purchased at prices lower than those listed in the indexes. For example, in the jointly built Payra power plant in Patuakhali (a Bangladesh-China initiative with a capacity of 1,320 MW), coal is procured at special discounted rates. Bangladesh, however, does not receive such discounts from Adani, resulting in higher coal costs and, consequently, more expensive electricity.

According to sources at the Bangladesh Power Development Board (PDB), the current average price of coal per tonne is between $65 and $70 at several major power plants, including The Payra Power Plant, the joint China–S Alam Group plant in Banshkhali, Chattogram, and the Bangladesh-India joint venture plant in Rampal, Bagerhat.

For recent calculations, PDB has considered coal used at Adani’s plant to be around $65 per tonne, but Adani is demanding $80 per tonne. As a result, there is a recurring difference of $15 to $20 per tonne between the two estimates.

Outstanding payments and dollar shortage

Due to Bangladesh's ongoing foreign currency crisis, outstanding bills to Adani began to pile up during the Awami League government. These arrears eventually rose to $700 million (approximately Tk 86 billion).

As per PDB’s own records, payments up to June have been settled. However, based on Adani’s higher coal price claims, an additional $200 million (about Tk 25 billion) remains disputed and unpaid.

Failed talks and legal preparations

To resolve the dispute, top officials from Adani and PDB met on 23 June, but no resolution was reached. Several earlier rounds of meetings also failed to resolve the issue.

The contract signed with Adani during the Awami League government is clearly an unequal agreement. Several undue advantages have been granted to Adani under that deal.- Member of a committee formed to review the contract between PDB and Adani

Sources at PDB confirmed that, due to the ongoing stalemate, Adani has appointed the renowned Singapore-based law firm Duxton Hill Chambers, along with another legal firm, The Arbitration Chambers, also based in Singapore. Experienced international arbitration lawyers will represent Adani in the proceedings. In response, PDB is also reaching out to international law firms to prepare its legal defence.

Interim government reviewing contract

A committee formed by the interim government is currently reviewing the contract between PDB and Adani. One member of the committee, speaking to Prothom Alo on condition of anonymity, stated, “The contract signed with Adani during the Awami League government is clearly an unequal agreement. Several undue advantages have been granted to Adani under that deal.”

Why the contract is 'unfair'

Two senior officials at the power division and PDB told Prothom Alo that in all other power plants, actual coal procurement cost is used when calculating expenses. But under the power purchase agreement with Adani, the cost has to be determined by averaging prices from the Indonesian and Australian indexes. Because of this averaging rule, Adani gets an opportunity to claim a higher coal price.

PDB claims that the two international indexes (Australia and Indonesia) list coal prices for different grades (calorific values). Adani has been using the higher-quality coal prices from these indexes to compute the average. However, the coal they actually use is of a lower grade, which should cost less.

Prothom Alo has reviewed the contracts between PDB and Adani, and between PDB and the Payra coal‐based power plant, with a BUET expert. In the case of Adani’s contract, there is a 15 per cent per annum high interest charge for late payment, which does not apply for Payra.

All expenses of Adani’s power plant are the responsibility of PDB. Adani alone will determine the interest rates and terms for any investment under the contract. The government of Bangladesh has no control over that. There are also costs for water usage that Bangladesh has to pay under Adani’s contract, which do not apply in Payra.

PDB sources say that after the people’s uprising, calls for rescinding the 'unfair contract' with Adani have become stronger. But a contract cannot simply be cancelled. Therefore, talks are ongoing to rectify the inconsistencies. If done, the price of electricity bought from Adani could come down.

The special assistant on energy to the chief adviser during the former caretaker government, M Tamim, told Prothom Alo that this is a flawed or unfair contract. Regardless of relations with India, the contract with Adani can be renegotiated or amended. If that fails, the government can take the matter to court to challenge the unfair aspects. He further said that if Adani goes to international court, then Bangladesh must hire skilled and experienced international lawyers without worrying about cost.

Electricity prices are higher

During the July people’s uprising, the deposed Awami League government built one power plant after another, many in excess of need. They also pursued importing electricity from India and Nepal. There is a contract to import 2,656 MW from India; of that, 1,160 MW comes from Indian government power plants; the rest from Adani, a business concern close to the BJP government. From Nepal, 46 MW is imported.

According to PDB sources, the accounts for the last financial year are not finalised yet. But for 2023–24, buying electricity from Adani cost about Tk 14.87 per unit. In the same period, the average cost per unit from other Indian power plants is around Tk 8.40.

In Bangladesh, the production cost at Payra coal plant is under Tk 12 per unit. The power purchase agreement with Matarbari hasn’t been finalised, but the price has been fixed at Tk 8.45 per unit. Matarbari plant is financed by Japan, and constructed by the state‐owned Coal Power Generation Company.

Shamsul Alam, energy adviser to the Consumers Association of Bangladesh (CAB), told Prothom Alo that if the current contract remains in place, Bangladesh will continue to pay excess bills. According to him, Adani would have advantages even in international courts. So, he argues, the government should sue Adani in local courts for contract cancellation on grounds of it being unfair. He also pointed out that previously the government sued the foreign company Nike and won in a local court.

News Link: Dispute over coal prices: Adani likely to go to court