Bangladesh is likely to incur a huge financial loss to the tune of about Tk 700 crore per month, once it starts importing electricity from the Adani Power-built 1,600 MW thermal power plant in Godda, Jharkhand state - due to the ‘faulty’ deal the government signed with the private Indian company.
“Including the cost of coal and its transport, we have to pay Tk 2,100 crore per month to import 1,600 MW from Adani's plant at a 75 percent plant factor considering the existing rates of coal in the international market," a top official of the state-owned Bangladesh Power Development Board (BPDB) told UNB.
If some rules and provisions observed in other similar deals (from the private sector, coal-fired) had been maintained here, the cost could have been kept down to Tk 1400 crore per month. The country has to count a loss of about Tk 700 crore per month, working out to Tk 8400 crore annually for the faults in the deal, he added.
Over the project’s life cycle of 25 years, the loss in terms of the increased cost and hidden components in the tariff Bangladesh will ultimately incur, balloons out to Tk 2.10 lakh crore - a third of the national budget - considering the current coal price, the senior official noted.
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Even before coming to the hidden components, he said the tariff Adani managed to negotiate in the deal is almost double the purchase price from local coal-fired power plants, and thrice the rate of the power already being imported from India.
Yet the loss will mainly be incurred due to the absence of any discount provision on the purchase of coal as fuel to operate the plant in the deal signed with the Indian business group, said the official, who spoke on condition of anonymity as the issue is highly sensitive.
According to official sources, the import of electricity from the Adani plant may start from next March.
Adani Power, a subsidiary of the Adani Group, the business empire led by the world’s second-wealthiest man, Gautam Adani, bagged the deal in 2015 during Indian PM Narendra Modi’s first visit to Dhaka. Adani is well-known for being close to Modi, right from the latter’s days as chief minister of Gujarat.
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Under the deal signed with Adani Power, a 1,600 MW coal-fired power plant was set up in the eastern state of Jharkhand, with a target to export its entire electricity to Bangladesh.
As per Power Division documents seen by UNB, Bangladesh will have to pay Adani Power about $23.87 billion, equivalent to Tk 248,248 crore (considering US dollar exchange rate at Tk 104), over the 25-year life cycle of the plant.
Officials said Bangladesh signed the final power purchase agreement (PPA) with Adani Power during Prime Minister Sheikh Hasina's New Delhi visit in 2017.
Adani Group’s deal is not only faulty; the rate it is charging for its electricity is higher than rates of other coal-fired power plants.
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Adani will be paid 8.612 cents per kilowatt hour (per unit), a levelised tariff for the electricity while the tariff for power purchase from a local coal-fired plant of the S Alam Group was set at 8.2557 cents per unit.
The purchase rate of electricity from the Indian government (3.54 cents per unit) and private sector (7.84 cents per unit) are also lower compared to Adani's tariff.
The government also had deals with other local and foreign companies at much lower rates such as Orion Khulna Power at 5.407 cents (Tk 4.35), and SEPC Taylor Power at 8.430 cents (Tk 6.78) per unit.
Admitting the tariff charged by Adani is higher compared to that of other companies, Power Division officials said it is due to a number of reasons, including India’s high corporate tax and the cost of transmission lines that need to be constructed and maintained to move the electricity across borders.
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The BPDB official said the lack of a provision for discounts in the purchase of the coal that will be used to fuel the plant is an oversight, considering such a provision was made mandatory in other deals that Bangladesh signed with independent power producers (IPP), where the price of coal to be purchased was kept as “pass-through”.
Explaining the matter, he said Adani will purchase the coal for its power plant as primary fuel and Bangladesh will pay the price of the coal.
Normally, the coal price is calculated on the basis of the Newcastle Price Index, and if any company purchases coal at a higher quantity with higher calorific value, then it gets upto 55 percent discount on the bulk value.
This was the provision kept in the power purchase deal from the 1320 MW Payra power plant, a joint venture project of Bangladesh and China, where BPDB is benefiting from the discount in the price of coal.
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“But BPDB will not get any discount in coal price which ultimately pushes up the electricity tariff from the Adani plant by at least 50 percent,” said the official who has been involved in handling the project from BPDB.
As a result, if the price of electricity from Payra is calculated at Tk 12-13 per unit including the cost of coal, the price of per unit electricity from Adani plant will be about double at Tk 20-22 per unit, he added.
Secondly, another fault in the deal is allowing Adani to import coal at its own choice (it even has its own coal mines) using its own ship and unloading it at its own port and then bringing the coal to its own power plant in Jharkhand via a massively elongated route.
In this case, the transportation cost will go up excessively as the coal will be imported from Australia or Indonesia, both located to India’s east, and then unloaded at Adani-operated Mundra port in the Kutch district of Gujarat, a western Indian state, on Adani’s own shipping line.
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After unloading, the coal will be transported some 2031.8 km by road from the far-western port of Mundra to the far eastern district of Godda in Jharkhand, a journey across the breast of India, to reach the power plant.
The entire cost of coal purchase and transportation will be paid by Bangladesh as per the agreement, which raised eyebrows of many energy experts.
If Adani purchases coal with low calorific value, then it has to import coal in higher quantities which will result in an even higher transportation cost, which would ultimately further push up the hidden component of the total tariff, said the BPDB official.
Admitting the “no discount provision” in Adani’s deal, BPDB Chairman Mahbubur Rahman said since Adani will purchase the coal through open tender, there is no provision for discount.
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About the deal, when it was approved by the Cabinet Committee on Government Purchase, the then power secretary Dr Ahmad Kaikuas in a proposal had mentioned that the decision to import power from Adani Group was made on the basis of unsolicited offer under the 'Speedy Enhancement of Power and Energy Supply Act (Special) (Amendment) Act 2015'.
"The proposal doesn't contradict the existing law, rules and regulation and no deviation was made in dealing with the matter," he said.
The Power Division documents also reveal that in the tariff structure of Adani Group, the capacity charges were calculated at 3.8 US cents per unit while the variable operation and maintenance charges were at 0.1 cents per unit and the fuel price (cost of coal) was calculated at 4.7127 cents per unit.
Power Division officials said Adani Group, which has experience of operating and maintaining 10,440 MW power plants in India and elsewhere, would be investing $2.124 billion to set up the 1600 MW dedicated plant in Jharkhand.
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Bangladesh will need to construct 145-kilometre transmission lines up to the Indian border at a cost of Tk 1,000 crore while Adani group will need to build a 90 km transmission line on the Indian side to supply the electricity.