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New Delhi: Bangladeshi authorities have demanded revisions to an agreement with Adani Power Ltd to import electricity from a thermal power plant in Jharkhand at “exorbitant” coal prices, Bangladeshi media reported.

The Bangladesh Power Development Board (BPDB) signed a 25-year Power Purchase Agreement (PPA) in Dhaka in November 2017 with Adani Power to supply 1,496 megawatts (MW) of electricity from a coal-based power plant at Godda in Jharkhand.

BPDB, which oversees the development of Bangladesh’s power sector, has sent a letter to Adani Power regarding the revision of the agreement, the United News of Bangladesh (UNB) news agency reported, citing unnamed officials. Dhaka’s position on the issue was conveyed to Adani Power when Bangladesh Minister of State for Power Nasrul Hamid visited the power plant in the first week of January, the report said.

External Affairs Ministry Spokesperson Arindam Bagchi, while responding to questions on the matter in a weekly media briefing, described the matter as an agreement between a sovereign state and an Indian company. “I don’t think we’re involved in that,” he said.

India believes that greater economic integration with its neighbors will help the development process. “We have been saying that our neighbors are benefiting from India’s economic growth. We’ve tried to make it easy to connect, whether it’s physical, energy, or energy…that’s part of our larger Neighbor First strategy. Accordingly, we want to see greater economic ties, integration of projects, investments, but if a certain project does not work for financial or economic reasons, I do not think this reflects the relationship, he said.

The UNB report said the BPDB’s letter was a formal request to revise the agreement and adjust the tariff structure before Bangladesh started importing electricity. The plant is expected to start exporting 750MW to Bangladesh from March.

“We have sent a letter to the Adani Group following a request to open LCs (in India) to import coal to fuel the 1,600MW plant at Jharkan,” an unnamed BPDB official was quoted as saying. According to UNB.

Adani Power has asked the BPDB to issue a memorandum of interest, citing an estimated coal price of $400 per metric ton — a rate that BPDB officials believe should be offered given current global market conditions, the report said.

“In our view, the price of coal you mentioned ($400/MT) is excessive – it should be less than $250/MT, which we pay for the coal that comes in our other thermal power plants,” said the official. According to UNB.

As almost all power from the plant in Jharkhand is exported to Bangladesh, Adani Power needs a letter of intent from BPDB to open a letter of credit for importing coal. The cost of importing coal, including transportation from the port to the plant, is borne by Bangladesh and the price is linked to the PPA tariff structure.

The deal has been the subject of controversy in recent weeks in Bangladesh, particularly over the $1.7 billion power plant in Jharkhand’s tariffs, which are higher than what Bangladesh currently pays other private electricity suppliers. Bangladeshi experts are particularly skeptical that such a clause should be included in agreements with other foreign energy suppliers to cap coal prices.

UNB also cited unnamed BPDB officials as saying that the absence of a “discount provision” on the purchase of coal in the agreement with Adani Power “allowed the Indian company to quote such a steep bill for coal”. Coal for the project will be procured from the Adani-owned Carmichael mine in Queensland, Australia, the report added.

Officials said Bangladesh pays Taka 20-22 for each unit of electricity from the Adani plant, while coal-fired electricity in Bangladesh costs less than Taka 12 per unit. Officials said that unless the coal pricing mechanism is adjusted, Bangladesh will inevitably import power from the Gowda plant.

The report, citing documents from the Bangladesh Power Division, said the country would pay Adani Power an estimated $23.87 billion, or nearly Taka 240,000 crore, over the plant’s 25-year cycle if the deal remains unchanged.

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