Adani Power Jharkhand Limited (APJL), a subsidiary of Adani Powr, recently cut its electricity supply in Bangladesh by half, citing outstanding payments of $846 million. The move put additional pressure on a country already grappling with a growing financial and energy crisis.

The curtailment, which began Thursday evening, has led to a power deficit of more than 1,600 megawatts (MW) in Bangladesh, with Adani’s 1,496 MW plant now operating at half capacity, producing just 700 MW.

Currently, Bangladesh is grappling with significant financial difficulties due to inflation, currency devaluation and a foreign exchange crisis that are impacting daily life and economic stability.

IMPACT OF REDUCING POWER SUPPLY

The reduction in electricity supply could not come at a worse time for Bangladesh. Amid an economic slowdown, Bangladesh faces increasing energy demand due to rapid urbanization and industrial expansion.

The country relies heavily on imported energy resources to meet these demands, but high global energy prices have made imports increasingly expensive, straining Bangladesh’s foreign exchange reserves.

Now, with Adani Power cutting its supply in half, Bangladesh’s power deficit has widened, leading to power outages that disrupt industries, businesses and households.

The Bangladesh Power Development Board (PDB) is working to clear part of its dues, but rising costs have complicated the process. Adani Power, citing its power purchase agreement (PPA) with the PDB, has reinstated its original method of pricing coal after a temporary price reduction expired.

It is worth noting that the initial pricing ties coal costs to the Indonesian and Australian Newcastle indices, both of which have increased, leading to higher energy costs for the PDB.

WHY BANGLADESH STRUGGLED TO CLEAR ADANI CONTRIBUTIONS

The shortage of dollars in Bangladesh has compounded the problem, affecting the PDB’s ability to meet its financial commitments. Although Bangladesh Krishi Bank agreed to issue a letter of credit of $170.03 million to Adani Power, it could not do so due to limited availability of dollars.

With PDB’s weekly payments falling short of Adani’s tariff increase, contributions increased, pushing the power company to cut production.

The dollar shortage is also hampering Bangladesh’s ability to secure essential imports like fuel and food. As foreign exchange reserves dwindle, the country faces rising inflation, making basic necessities more expensive.

Cutting off Adani’s electricity supply adds another dimension to these economic pressures, underscoring the interdependence of Bangladesh’s energy needs and its financial stability.

IMPACT ON THE ECONOMY OF BANGLADESH

The recent development highlights the broader vulnerability of Bangladesh’s economy, which is feeling the effects of rising global prices, supply chain disruptions and dwindling export earnings.

Sectors that rely on constant electricity, such as manufacturing and textile production, are likely to suffer the most from electricity shortages, which could affect exports, a crucial source of income for Bangladesh.

In a country where a steady supply of electricity is vital for economic growth and social stability, the Adani Power shutdown could worsen the challenges Bangladesh faces in maintaining energy security amid financial woes.

As Bangladesh finds itself in this impasse, questions arise about the long-term stability of its energy deals.

With PDB’s payments late due to economic constraints, other electricity suppliers may also reconsider their terms if financial guarantees are not met. Adani’s insistence on recovering capacity payments during the supply suspension – permitted by the PPA – highlights the potential financial risks that could arise if other energy suppliers follow suit.

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