Bangladesh overpaying India's Adani Power by about 50%

Bangladesh has been paying India’s Adani Power about $400–500 million more each year than it should for electricity, amounting to roughly a 50 percent overpayment, according to a report by the national committee reviewing power sector agreements.

The committee found that electricity prices under the Adani deal have risen sharply over time, with increases far exceeding those seen in comparable contracts with local coal-based power plants.

When the project was approved in 2017, the tariff was set at $0.0861 per kilowatt-hour, the highest initial rate among similar plants. That price has since climbed to $0.149 per kilowatt-hour, the report said.

Under current terms, the Adani contract carries a 39.7 percent premium over its closest private-sector competitor and costs 2.7 times more than older public-sector power purchase agreements.

According to the committee, the disparity was not caused by inefficiency in operations but by the structure of the contract itself, including fuel cost pass-through mechanisms, exchange-rate indexation and the spreading of fixed capacity charges across lower-than-expected power dispatch volumes.

The committee said it had gathered substantial documentation that could support corruption charges in court. Mushtaq Khan, a professor of economics at SOAS University of London and a member of the committee, said the contract’s structure alone could be considered preliminary evidence of corruption.

“Under international law, irregularities in a contract often indicate the presence of corruption, because no prudent official or politician would normally sign such an agreement,” Khan said.

He added that at least six officials from the Prime Minister’s Office and the power division were identified as having directly benefited from the deal. The report also cited correspondence exchanged between Adani Power and senior government officials before the contract was finalized.

Khan said canceling the agreement would be a political decision and urged any future government to commit to full legal and institutional action regarding the Adani contract.

However, he warned that challenging the deal could result in short-term electricity shortages and load-shedding. He said the public should be prepared to endure six months to a year of hardship in exchange for relief from what he described as a 25-year financial burden.

The committee noted that the project was approved through an unsolicited process without open tendering, systematic benchmarking or transparent assessments of value for money.

The power purchase agreement included several unusual provisions, such as full pass-through of Indian corporate taxes into the Bangladeshi tariff, clauses protecting Adani from Bangladeshi withholding taxes, and political-event clauses that allow tariff increases linked to regulatory or policy changes by the Indian government. These provisions, the report said, exposed the Bangladesh Power Development Board to significant financial risk.

In 2015, the power division approved two memoranda of understanding between PDB and Adani Power to build one power plant in India and another in Cox’s Bazar. Eventually, only the MoU for a plant in India was signed, without detailed feasibility studies explaining why the project was not developed in Maheshkhali or the rationale for locating it in India’s Jharkhand.

The committee noted that it was already clear at the time that a coal-based plant in India supplying power exclusively to Bangladesh would need imported coal, eliminating any cost advantage over building the plant in Bangladesh. Both locations would rely on imported coal, while the Indian option added the extra expense of long-distance power transmission.

The report also pointed out that Bangladesh would face difficulties independently verifying the cost of coal used in Jharkhand, as the fuel would not be imported into Bangladesh, further complicating cost oversight.