Bangladesh is ramping up payments to Adani Power after the Indian conglomerate cut electricity supplies by half, reportedly over an unpaid $800m bill.
Two senior government officials told the BBC they are already processing partial payments to Adani, which supplies 10% of the electricity used by Bangladesh.
“We have addressed payment glitches and already issued a $170 million [£143m] letter of credit to Adani group,” a senior Bangladesh Power Development Board official told the BBC.
Adani supplies Bangladesh from its 1600 megawatt coal-fired plant in eastern India. The company hasn't responded to BBC queries about cuts to its supply to Bangladesh, which suffers regular power shortages.
Officials say the company has threatened to suspend all supplies if the money owed to it is not cleared by 7 November. But the Bangladesh Power Development Board official said they did "not believe it would not come to a stage where full supplies are cut off".
Bangladesh officials told the BBC they will make payments gradually and regularly and are confident of resolving the payment crisis.
“We are shocked and surprised that despite us ramping up payments, supplies have been cut. We are ready to repay and will make alternate arrangements, but will not let any power producer hold us hostage and blackmail us,” said Fouzul Kabir Khan, energy adviser to the interim government.
Bangladesh stepped up repayments from $35m in July, to $68m in September and $97m in October, he said.
The country is already suffering from increased power shortages in rural areas.
Political turmoil
Bangladesh has been struggling to generate dollar revenues to pay for costly essential imports like electricity, coal and oil. Foreign currency reserves fell during months of student-led protests and political turmoil that ousted the Sheikh Hasina government in August.
The interim government which replaced her has sought an additional $3bn loan from the International Monetary Fund (IMF) in addition to its existing $4.7bn bailout package.
Adani’s power deal with Bangladesh, signed in 2015, was one of the many under Sheikh Hasina, which the current interim government has called opaque. A national committee is now reassessing 11 previous deals, including the one with Adani, which has often been criticised as expensive.
Besides Adani Power, other Indian state-owned firms also sell power to Bangladesh, including NTPC Ltd and PTC India Ltd. Power Development Board officials confirmed that partial payments of money owed to other Indian power suppliers are also being made.
Bangladesh is restarting some of the gas-fired and oil-fired power plants to bridge the supply shortfall, although experts say it will increase the cost of power. With winter approaching, power demands on the grid is expected to ease as air conditioners are switched off.
“Other coal-fired plants are running at 50% capacity and the country is unable to buy enough coal owing to the dollar crisis, so it is important to continue readymade power supply from Adani. It is marginally more expensive than local producers but it is a crucial supply,” said Dr Ajaj Hossain, energy expert and a retired professor.
Bangladesh is planning to commission its first nuclear power plant in December to diversify its energy mix. Built with Russian assistance, it is costing $12.65bn, mostly financed by long-term Russian loans.
