Bangladesh's interim government has accused Adani Power, an Indian energy supplier, of violating a multi-billion-dollar agreement by withholding tax benefits granted to a power plant critical to their deal.
In 2017, Adani Power, controlled by billionaire Gautam Adani, signed an agreement with Bangladesh to supply power from its coal-fired plant in eastern India.
The deal, awarded by then-Prime Minister Sheikh Hasina without a tender process, is significantly costlier than other coal power deals, according to Bangladesh Power Development Board (BPDB) documents and interviews with six Bangladeshi officials.
The agreement, under scrutiny for its terms and transparency, also included provisions for passing on tax exemptions received from the Indian government—something Bangladesh alleges Adani Power has failed to do, reports Bangladeshi newspapers citing Reuters.
Contract controversy and tax benefits
Bangladesh claims Adani Power did not pass on tax exemptions granted by India’s government, as required by the agreement signed in 2017. Letters sent by BPDB in September and October 2024 urged Adani to remit the benefits, which could save an estimated $28.6 million annually, but reportedly went unanswered.
The contract also allowed Adani Power to charge tariffs significantly higher than the average cost of power imported from India. Muhammad Fouzul Kabir Khan, energy and power adviser of the interim cabinet, emphasised that the savings from the tax benefits would play a pivotal role in upcoming renegotiations.
Payment disputes
Since Adani Power began supplying electricity in July 2023, Bangladesh has fallen behind on payments, owing between $650 million and $900 million, depending on disputed calculations. A severe dollar shortage has hampered Bangladesh’s ability to meet payment obligations.
Adani Power, citing unpaid bills, halved its power supply in October, despite receiving a $97 million payment earlier that month—the largest this year. The reduction angered Bangladeshi officials, who viewed the move as retaliatory.
Court-ordered investigation and international pressure
In November, US prosecutors indicted Adani and seven executives in a $265 million bribery scheme unrelated to Bangladesh. Dhaka is leveraging this development to reopen the 25-year deal. A court-ordered investigation into the deal and recommendations from expert panels are adding pressure to renegotiate the terms.
Sheikh Hasina, who awarded the contract during her tenure, has not been publicly seen since fleeing to India after being ousted in August by Muhammad Yunus’ interim government. Hasina’s son, Sajeeb Wazed, denied corruption allegations, attributing the deal to possible Indian lobbying efforts.
Future implications
Bangladesh is urging Adani Power to adjust tariff calculations based on updated benchmarks to lower energy costs. Arbitration, if required, would occur in Singapore, but any decisions may hinge on the outcome of the ongoing investigation.
“If it is proven that bribery or irregularities occurred, the court's orders will dictate whether cancellation is necessary,” Fouzul Kabir said.
Adani Power maintains it has upheld all contractual obligations and denies awareness of any renegotiation.