Kodda coal power purchase agreement shrouded in secrecy

Special Report :
Built into Adani’s Power Purchase Agreement (PPA) are components that the company will not incur as it is about to supply electricity to the Bangladesh grid. Excise tax, VAT, CST etc. will not be imposed or greatly reduced because the plant area has been designated at Special Economic Zone, yet Bangladesh has to pay these in addition much higher coal prices due to incorrect indexation in the hastily signed PPA. Even if the power plant is sitting completely idle, Bangladesh must pay nearly half a billion USD in capacity charges annually.
Tim Buckley, director of Climate Energy Finance in Sydney and a critic of Adani who has long tracked the company’s coal operations in Australia and Bangladesh, called the Bangladeshi contract “one of the most expensive power purchase agreements I have ever seen.” He referred to Bangladesh’s transporting coal from Australia to Godda as “strategically ridiculous.”
Now, Bangladeshi officials want to review their electricity agreement with Adani. The project, set to begin this year, will import electricity from the 1,600 megawatt Godda power station in eastern India’s Jharkhand state, which is powered by coal that will likely be shipped by ship from Adani’s Australian Carmichael mine.
Anu Muhammad, a professor of economics speaking to media, declared that “this agreement was not made to satisfy our demand for electricity in Bangladesh.” It was created to appease Modi and Adani.
This is an unfounded accusation, according to Adani, who also noted that the deal would deliver much-needed, dependable electricity “at a very competitive rate” in comparison to other projects in Bangladesh.
At a gathering in Dhaka on February 5, economist Rehman Sobhan, head of the Centre for Policy Dialogue, declared, “This is definitely not a smart arrangement, and it definitely needs to be reworked.” The agreement with Adani Power, he said, was “very unusual.”
The going rate for coal, according to BPDB officials, is about $250 per ton, but Adani wishes to charge $400, a 60% premium. This showed that neither a price cap on coal nor special terms for large-scale, long-term purchases are included in the agreement.
The opposition Jatiya Party questioned why electricity was being bought from the Adani Group at exorbitant rates in the Bangladeshi parliament. As the electricity tariff from Adani Power is 24.10 U.S. cents per kilowatt-hour compared to 13.37 cents at Bangladesh’s Payra power plant and 18.39 cents at a S. Alam station in Chattogram, lawmaker Mujibul Haque Chunnu requested a reexamination of the agreement.
According to some analysts, the agreement has serious problems. The coal price is based on the Newcastle spot price, which Mohammad Tamim, a professor of petroleum and mineral resources engineering at Bangladesh University of Engineering and Technology, said is “something we shouldn’t have committed to at the beginning.”
Power plants all have long-term coal agreements, and they only purchase coal from there in an emergency. Long-term agreements are always reduced, sometimes by as much as 55%. Tamim claimed that the cost of the Payra factory is up to $220 per tonne, significantly less than what Adani is reportedly looking for.
This month, Rahul Gandhi, the head of the nation’s largest opposition party, the Congress, claimed that Modi’s administration was using its diplomatic network to promote Adani’s interests over those of India. “India’s foreign strategy is not this. Gandhi referred to Adani with a customary honorific, “Adani Ji,” and stated that this was his foreign policy. This is a strategy to expand his companies,
According to the quarterly reports of his seven publicly traded companies and industry experts, the Adani Group’s income comes from businesses that are connected to coal to a greater than 60% extent. Four coal power plants, 18 coal mines, and a coal trading company account for a quarter of India’s imports. India depends on coal for the generation of 75% of its electricity.
Recently, BPDB officials tried to reduce the cost of electricity and change other clauses that permit Adani to charge more for coal. Analysts warn that the nation’s power industry already has overcapacity.
The BPDB “has written to us to consider discounting the variable energy costs on a temporary basis, given the present high thermal seaborne coal prices, which is under consideration,” an Adani Power spokesperson told Nikkei Asia. However, the representative denied getting a request to modify the actual agreement.