Adani Power Accused of Breaching Agreement with Bangladesh

Bangladesh's interim government has accused Adani Power of breaching a multi-billion-dollar agreement by withholding tax benefits that a power plant central to the deal received from New Delhi, according to documents seen by Reuters.

In 2017, the Indian company controlled by billionaire Gautam Adani signed an agreement with Bangladesh to provide power from its coal-fired plant in eastern India. Dhaka has said it hopes to renegotiate the deal, which was awarded by then-Prime Minister Sheikh Hasina without a tender process and costs Bangladesh far more than its other coal power deals, according to Bangladesh power agency documents and letters between the two parties reviewed by Reuters, as well as interviews with six Bangladesh officials.

Payment Dispute and Domestic Capacity

Dhaka has been behind on payments to Adani Power since supply started in July 2023. It owes several hundred million dollars for energy that has already been supplied, though the two sides dispute the exact size of the bill. Bangladesh's de facto power minister Muhammad Fouzul Kabir Khan told Reuters the country now had enough domestic capacity to cope without the Adani supply, though not all domestic power generators were operational.

Bribery Allegations and Renegotiation Plans

Reuters is reporting for the first time that the contract came with an additional implementation agreement that addressed the transfer of tax benefits. The news agency is also revealing details about Bangladesh's plan to reopen the 25-year deal, and that it hopes to use the fallout from U.S. prosecutors' November indictment of Adani and seven other executives for their alleged role in a $265 million bribery scheme to press for a resolution.

Adani Power has not been accused of wrongdoing in Bangladesh. A company spokesperson said in response to Reuters' questions that it had upheld all contractual obligations and had no indication Dhaka was reviewing the contract. The company did not answer questions about the tax benefits and other issues raised by Bangladesh.

Tax Exemptions and Future Discussions

Adani Power's Godda plant runs off imported coal and was built to serve Bangladesh. The company said the Bangladesh deal helped further Indian foreign policy objectives and Delhi in 2019 declared the plant part of a special economic zone. It enjoys incentives such as exemptions on income tax and other levies.

Power minister Khan said the savings would be a key part of future discussions with Adani Power. Bangladesh in November scrapped a 2010 law that allowed Hasina to award some energy deals without a competitive bidding process. The absence of tenders is unusual, said Tim Buckley, director of Australia's Climate Energy Finance think-tank, adding that auctions ensure "the best price possible."