Adani’s Bangladesh Situation has No Co-relation with Sri Lanka – Dr Naresh Bana

Over the last few weeks, it is noticed that an alarming narrative being built, which initially took life in social media but soon has found its way to mainstream media as well. A couple of social media handles began sharing their (ill-informed) concerns that the Adani Group, to which the Bangladesh government owes over $850 million resulting in the company reducing its power supply to them, will do the same if their wind project here comes up and Sri Lanka were to default too.

For perspective, Bangladesh government had unveiled its Power Systems Master Plan 2016, under which it planned to increase its power generation capacity to 24,000 MW by 2033. As part of this plan, Adani Power set up a dedicated $2 billion 1600MW imported coal fired power plant in India’s east to supply to Bangladesh. It signed a 25-year PPA with Bangladesh Power Development Board and began full supply from June 2023. The plant, which is not even connected to the Indian power grid, meets 7-10% of Bangladesh’s peak load demand. It is not just a symbol of Adani's commitment to Bangladesh's energy sector but also a strategic engagement to strengthen bilateral ties between India and Bangladesh. Adani is not alone in this energy engagement and there are several other Indian energy companies like NTPC, SEIL Energy India, and PTC who are also providing energy, equipment, advise or services to Bangladesh and have outstanding payments there. Electricity from Nepal is also being exported to Bangladesh duly facilitated by NTPC Vidyut Vyapar Nigam (NVVN) of India.

As per Bangladesh Power Development Board data Adani plant supplies the most competitively priced power amongst four other similar imported coal-based power plants located within Bangladesh and co-developed with Japan, China and India. Interestingly, while those plants don’t generate unless Bangladesh government either provides them with USA dollars to import coal or supports them through letter of credit, the Adani plant has continued to supply even with erratic payments.

Adani sells power worth $90-100 million a month but over the last several months, its payments have been irregular and hugely delayed, resulting in outstanding dues of over $850 billion, which continue to rise month-on-month. This means a payment backlog of 9-10 months. For months now Adani has been trying to impress upon the Bangladesh government to clear the dues and its chairman has even approached Prof Muhammad Yunus, Chief Advisor to Bangladesh government, for his intervention. The company’s plea is, such massive dues are making its operations unviable with its lenders and suppliers, who continue to demand regular payments. Being a publicly listed entity, the company has its responsibility to its shareholders as well, who are concerned about the situation.

Even in the face of such challenges, Adani has continued to supply power, though at reduced levels, as its lenders and coal suppliers have refused support for full plant operation. It can be well appreciated that if one payment cycle is 3 months, it is more than 3 payment cycles without due payment. Any other company would have filed for bankruptcy by now. NO? There is added problem also. The Adani power plant is not connected to Indian grid and thus can’t sell to Indian buyers while it continues to remain answerable to its stakeholders and continues to repay the project debt somehow. It is imperative to mention that this Adani power plant was exclusively setup for export to Bangladesh with due sovereign support.

In such context I am surprised that some in Sri Lanka are critical of Adani Power because it has reduced supplies from the dedicated power project to reduce her losses and impress upon Bangladesh Government to expedite payments of accumulated dues. Is there any other course open for any business owner in such a situation? Does Adani Power not have right to receive due payments for the energy supplied, even after nine months? How else do you think Adani can service their debts, pay their employees, and meet other financial commitments. Nobody would wait for Bangladesh to clear Adani dues before receiving their dues from the Adani Power.

Let’s see what would happen if anyone, as individual citizens, doesn’t pay the electricity bill within the due date? Wouldn’t Ceylon Electricity Board (CEB) line professional come and disconnect our power lines? Can anyone please tell me how are companies supposed to operate if they don’t get paid as agreed in the contract?

Many are suggesting that Adani would do the same here in Sri Lanka if its project was allowed to come up. It may be noted that both situations are different. In case of Sri Lanka, Adani would be using Sri Lanka’s natural resources i.e. Wind energy, to generate electricity in Sri Lanka itself. That is, the asset would be in Sri Lanka and it would generate electricity for Sri Lanka, generate local jobs for Sri Lankan youth and pay local taxes, just like any other company. There is little chance of CEB defaulting on payments of electricity dues as it has never done so. This confidence is further bolstered as Sri Lanka continues to have large unfulfilled electricity demand and tourism sector continues to grow to bring more and more foreign exchange. Remittances too are steadily increasing in Sri Lanka. Same is not the case with Bangladesh where tourism revenue is insignificant and due to economic mismanagement and adverse political event the apparel exports and remittances from nonresident Bangladeshis have reduced substantially to arrive at such an impasse. The two situations can never be compared as Bangladesh and Sri Lanka are two sovereign nations with distinctly different polity, economy and priorities. Let’s not succumb to loose talk.

Sri Lanka and Bangladesh are currently undergoing some challenges in their economy and striving to overcome those. Reliable and affordable energy is a key to ongoing economic development. Accordingly, both nations have existing government processes and schemes under which foreign investors can make their entry and participate in infrastructure development in Sri Lanka. In the interim, it is important to not get carried away by manipulated social media narrative without having a deeper understanding on the topic and lose sight of the larger national objectives.

Dr. Naresh Bana is Vice Chairman of Indo Sri Lanka Chamber of Commerce and Industry (ISCCI). He is a peer recognized international PPP consultant and ‘Subject Matter Expert’ (SME) with Government of India owned entity NHLML. A contributor to UNECE policy planning effort he is inter-alia leading their railway project team. A distinguished civil engineer he was awarded Ph.D. for his research in small PPPs. He is Fellow of Institution of Engineers (India), Life member of Indian Management Association and Member of Institute of Permanent Way Engineers (India).  He has published many papers and blogs in reputed papers/ journals incl in World Bank blogs. He has been delivering guest lectures to many business schools including Indian Institute of Management, Nagpur, India. PPP remains his passion, and his digital footprints are adequately visible on various social media platforms. Email: [email protected]