Delayed payments to companies have triggered threats of legal action and arbitration, as experts warn the disputes could harm Bangladesh’s credibility and investor confidence

Payment disputes have deepened tensions between the Bangladesh Power Development Board (BPDB) and private power producers, several of whom are now threatening to take legal action and even suspend operations if the impasse persists.

Over the past several years, companies such as Adani Power Limited have repeatedly raised concerns about the government’s failure to make timely payments. A series of letters exchanged between the producers and the BPDB outlines how payment backlogs have gradually disrupted their operations and financial stability.

According to energy experts, the ongoing foreign reserve crisis sits at the heart of the dispute, restricting Bangladesh’s capacity to settle dues on time or negotiate from a position of strength with power producers -- some of whom have allegedly gained undue advantages by manipulating prices or concealing information in their Power Purchase Agreements (PPAs).

“The government should exploit every opportunity for an out-of-court dispute settlement,” said Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue. “These disputes going to court will hurt Bangladesh’s business reputation and potentially discourage international investors.”

Documents reviewed by bdnews24.com suggest that while payment delays are not new, the relationship between BPDB and private operators began to sour more recently, particularly after the government started imposing liquidated damages. Liquidated damages refer to the predetermined financial penalties companies must pay if they fail to supply power as stipulated in their PPAs.

Under these agreements, a plant must maintain a minimum operational capacity -- typically 85 percent -- to qualify for full payment. Failure to meet this threshold allows the BPDB to reduce monthly payments accordingly. Private producers, however, argue that maintaining this minimum level of generation has become impossible due to fuel shortages, themselves a result of delayed payments from the BPDB. “Striking a balance of payments could be a very difficult task, particularly when there is a crisis of foreign reserves,” Moazzem added.

The interim government led by Nobel laureate Muhammad Yunus, which took office in August last year, inherited the challenge of clearing substantial arrears and renegotiating PPA terms that were largely signed without tender during the previous Awami League administration. BPDB sources said Bangladesh may contest past payments to Adani Power Limited, which allegedly secured undue financial benefits by concealing details of a tax waiver granted by the Indian authorities.

In an attempt to stabilise the situation, the government introduced cost-cutting measures across the sector, targeting a 10 percent reduction, or about Tk 105.48 billion, by reducing generation costs and avoiding surcharges for delayed payments. It also launched negotiations with major producers, seeking more time to settle dues. Energy analysts, however, note that these talks have faltered. The government’s unilateral decision to impose liquidated damages, they said, undermined efforts at reconciliation.

“Government tried to solve the problem unilaterally, further complicating matters instead of easing them,” said Hasan Mehedi, member secretary of the Bangladesh Working Group on Ecology and Development, a network of green activists. He warned that as long as the PPAs remain in force, arbitrary actions could only harm Bangladesh’s credibility and its long-term economic interests.

‘DISPUTES CAN NO LONGER BE RESOLVED AMICABLY'

“…we understand that the disputes can no longer be resolved amicably under section 19 of the PPA, but require escalation to arbitration,” reads a letter sent by Midland East Power Limited to the BPDB on Aug 25. The letter cites a long list of earlier correspondences -- identified by memorandum numbers -- in which Midland East Power repeatedly highlighted its difficulties in purchasing fuel and maintaining stable supplies needed for uninterrupted power generation.

According to the company, BPDB’s payments began to fall irregular from April 2022. Midland East also sought additional payments to offset losses caused by the steep depreciation of the taka against the dollar. When the power purchase agreement (PPA) was signed in 2017, the exchange rate was Tk 78.66 per dollar. Despite repeated reminders, the company said, BPDB began imposing liquidated damages for “excess allowable outage” starting in May 2024. Over the three months since then, Tk 310 million has been deducted under this clause.

Midland East Power accused the BPDB of failing to meet its payment obligations under sections 13.2(a)(i) and 13.1(d)(i) of the PPA. The company claims Tk 6.87 billion remains outstanding, including foreign exchange losses and interest on delayed payments, as of June 2025. The Ashiganj power plant, built with 23 generators each capable of producing just above 7MW, was required to maintain at least 93 percent operating capacity to avoid penalties under the PPA.

Midland power plant availability

PITFALLS OF DELAYED PAYMENT

Several PPAs oblige the BPDB to pay surcharges for delayed payments -- a clause that has become increasingly costly for Bangladesh. The Adani Power plant in Godda, built solely to export electricity to Bangladesh, is contractually entitled to a 1.25 percent monthly surcharge on overdue bills. Other Indian producers -- also exporting power to Bangladesh -- can claim up to 1.5 percent.

Because foreign companies are paid in US dollars, delayed payments translate directly into additional costs for Bangladesh. No comprehensive figure for the total loss is available, but BPDB’s own estimate in August last year projected that a delay in settling $861 million owed to Adani and other Indian suppliers could result in an extra Tk 10.86 billion in surcharges.

ADANI DEADLINE

Adani Power confirmed in an email to bdnews24.com that Bangladesh owes it $335 million, of which $135 million is undisputed and already subject to a late payment surcharge. The company noted that these bills had been pending “for a long time”. “In order to ensure a reliable power supply to Bangladesh, and as per the PPA provisions, we have requested the BPDB to clear these payments by Nov 10, 2025,” Adani said.

Adani power plant availability

However, the company declined to say what actions it would take should Bangladesh fail to meet the deadline, which falls tomorrow. Citing the ongoing dispute, Reuters reported on Nov 3 that Adani had initiated international arbitration proceedings over delayed power payment settlements with Bangladesh. Adani’s email also mentioned that part of the outstanding amount stems from disagreements over how bills are calculated under the PPA.

BPDB officials, on the other hand, argue that the PPA allows Adani Power to manipulate coal prices by charging for high-grade coal while supplying lower-quality fuel. Repeated phone calls to BPDB Chairman Rezaul Karim and Member (Company Affairs) ANM Obaidullah went unanswered.

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