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the story So Far: 14th August, Reuters India reported the introduction of amendments to power export rules. This allows Indian power exporters to redirect their generation to the Indian grid in case of payment delays from partner countries, to hedge against political risks in Bangladesh. Adani Power’s plant in Godda (Jharkhand) supplies all its generated power to Bangladesh. In a statement, an Adani Power spokesperson stressed its commitment to supply power to Bangladesh, saying the amendments do not affect its existing contracts.
What is the Godda Project?
Adani Power’s Jharkhand-based subsidiary supplies power to Bangladesh from its ultra super-critical thermal power plant in Godda with a net capacity of 1,496 MW. The facility is under a Power Purchase Agreement (PPA) signed with the Bangladesh Power Development Board (BPDB) in November 2017 for a period of 25 years.
The Godda plant is India’s first international power project that supplies all the power generated to another country. In a statement on July 15 last year, Adani Power said the power supplied from Godda would have a positive impact on the neighbour’s power situation by replacing expensive power produced using liquid fuel. It elaborated that this shift would help reduce the average cost of power purchased. According to the Bangladesh Power Development Board’s (BPDB) annual report for 2022-23, the country’s total installed generation capacity in June 2023 was 24,911 MW. Of this, 2,656 MW was imported from India (more than 10% of the total) with the Godda plant contributing 1,496 MW (about 6% of the total).
On policy mandates for power exports, India’s Ministry of Power issued guidelines for power exports in 2016, stating that power exchange in South Asia would “boost economic growth and improve the quality of life for all countries”.
Why was the project criticized?
Criticisms have arisen from the use of imported coal from the Carmichael mine in Australia, which is used in India to generate power for Bangladesh. The thermal plants use coal as the main fuel. The Institute for Energy Economics and Financial Analysis (IEEFA), analysing the PPA in April 2018, believed that it allowed Adani Power to “pass on the high costs of importing and transporting coal to India, as well as the cost of transmitting power across the border to Bangladesh.” The United News of Bangladesh reported about BPDB writing to Adani Power to amend the PPA in February 2023. The publication quoted an unnamed official as saying that the coal price quoted at $400/MT was “excessive” in BPDB’s view, and added, “It should be less than $250/MT, which is what we are paying for imported coal at our other thermal plants”. The second concern, as reported by the Bangladesh-based Daily Star in February last year, was the high capacity and maintenance charges, regardless of whether it generates any power or not. This was “very high” by industry standards, the report said.
Why does Bangladesh need to import?
The answer is underutilisation. In a different context, public policy analyst and economist Saumya Bhaumik explained to us the hindu Bangladesh has made significant progress in increasing access to electricity, especially in rural areas. However, despite the increase in power generation, India’s South Asian neighbour is facing a shortage of fuel and gas supply, thus, underutilising its power plants. In fact, in July 2022, Bangladesh sought assistance from the International Monetary Fund (IMF) to protect itself from financial shocks triggered by volatile energy prices following Russian actions in Ukraine. This came as the country experienced blackouts, sometimes lasting up to 13 hours a day, as utilities struggled to find a source of enough diesel and gas to meet demand, AFP reported.
In addition, Hasan Mehedi, a Bangladesh-based activist specialising in power and climate change, also pointed to a “serious level of excess capacity in Bangladesh”. Citing official data, Mr Mehedi said that as of June 30 this year, the total power generation capacity was 28,098 MW, of which the peak power generation was 16,477 MW – that is, an unused idle capacity of about 11,621 MW.
Where do we stand now?
Mr. Bhaumik says the regulatory change gives power exporters greater flexibility by allowing them access to the domestic market and reducing dependence on external markets. This reduces risks associated with instability or economic challenges in neighbouring countries, he explains.
Furthermore, Mr. Mehedi pointed out that the hindu Delays in payments are common. “A thorough internal scrutiny system is followed once the bill is presented to BPDB,” he said, elaborating, “BPDB will then evaluate the prices of coal in the open market and other expenses mentioned in the bill. It will then send it back to the company for necessary correction.”
On the likely impact of the latest developments on Bangladesh, Mr Mehedi said: “Even if the supply is completely cut off, the impact will last for 2 to 3 days but not for long due to the suddenness of the incident.”
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