Power Countdown To Blackout: Adani Issues Ultimatum, Bangladesh To Clear All Dues By Nov 7!

In a move that has sparked concerns in Bangladesh, Adani Power Limited recently issued a firm ultimatum regarding the payment of outstanding electricity bills. With nearly $850 million in dues still unpaid, Adani has warned that it may completely suspend its power supply to Bangladesh if the amount isn’t cleared by November 7. The issue has already led to Adani halving its supply, putting Bangladesh on edge about the consequences of a possible power cutoff. Here’s a look at the situation, the reasons behind the payment delays, and what might come next.

Understanding the Energy Ties Between Bangladesh and Adani Power

Adani Power, through its subsidiary Adani Power Jharkhand Limited (APJL), provides electricity to Bangladesh under a long-term contract. Bangladesh began receiving power from Adani’s Jharkhand-based Godda plant to help meet its growing electricity demand.

This partnership has proven critical, as Bangladesh’s rapid economic growth has increased its electricity needs faster than domestic power projects have been able to keep up. The Godda power plant supplies as much as 1,496 megawatts (MW) to Bangladesh, supplying nearly 12% of the energy required by the country. The deal was a strategic move so most electricity shortages could be solved and Bangladesh’s industries, homes, and businesses could stay working. Recently, the financial burden of keeping up with payments has added to the strain between the parties.

Why Did Payments Delay by Bangladesh?

The payment problems of Bangladesh began with multiple local issues. The first issue is that the country has been dealing with a dollar shortage, making it difficult to make payments in foreign currency.

Electricity imports from Adani’s coal-fired plant have also become much more expensive due to inflation and higher global coal prices.

With the monthly electricity bill from Adani fluctuating between $20 million and $50 million, the rising coal prices have brought that figure closer to $100 million in recent months.

The power purchase agreement (PPA) between Adani Power and Bangladesh’s Power Development Board (BPDB) requires a monthly payment, with security in the form of a Letter of Credit (LC). This LC, summing to $170 million, has yet to be cleared by Bangladesh’s designated bank, Bangladesh Krishi Bank, primarily due to the dollar shortage.

The payment difficulties have caused arrears to pile up, creating pressure on BPDB to meet Adani’s demands amid limited resources.

How Supply Halving Affects Impact?

Adani had cut half the supply to Bangladesh on October 31 as one of the two units at the Godda plant was operational. As a result of this cut, Bangladesh’s power grid felt the immediate impact and is undergoing more regular load-shedding. Industries across Bangladesh, including the essential textile and garment sectors, are feeling the strain as power shortages disrupt production and daily operations.

Reports indicate that power shortfalls exceeded 1,600 MW on the night Adani halved its supply, affecting millions of Bangladeshis and slowing industrial productivity. Although Bangladesh has said it would rely less on imported energy, the country still gets large portions of its power from imports with relatively limited sources available. The government is doing everything to expand alternative energy, including LNG, coal and renewables, but that brings new projects years away from supply response.

Current Efforts to Resolve the Dispute

Negotiations are ongoing, with BPDB reportedly making efforts to fulfil Adani’s payment requirements. BPDB has been making incremental payments, and officials have stated they are working to arrange for the LC despite the ongoing currency challenges.

Bangladesh Krishi Bank has been working to facilitate the LC, but due to the dollar shortage, progress has been slow. The company has said that Bangladesh should adhere to its contractual promise, and if they do, Adani will continue supplying electricity.

The advantage for the Indian company is in making money and being strategically located, but viability. It’s likely that Adani would prefer to resolve the issue amicably rather than lose a key client; however, mounting debt and cash flow constraints have compelled them to take a firmer stance.

The Possible Consequences of a Full Power Suspension

If the payment issues aren’t resolved by November 7, and Adani follows through on its warning to cut off the supply, Bangladesh could face a more severe electricity crisis. Industries may suffer production losses, which could impact exports, especially from the textile and garment sectors, which contribute significantly to Bangladesh’s economy.

Long and repeated blackouts would hit businesses, schools, hospitals and homes at a more day-to-day level, straining an already strained grid even further. In the long run, that may push Bangladesh to rethink its dependence on electricity it buys externally and spur domestic power investments. Bangladesh needs a foreign power supply to run its growing economy, but the crisis underlines the precariousness of reliance on global suppliers for such a vital commodity.

Looking Ahead: Changes in Energy Policy?

In this regard, Bangladesh may push its initiatives at home for energy before looking to diversify through further partnerships. The government stations some LNG and renewable energy projects; however, it will demand much more resources and time to fulfil the prevailing need for those projects. Implementing more robust payment security features would also protect both sides in future international deals by allowing transactions with zero risk. The next few days will be crucial in deciding if a truce is reached that enables Adani to resume the normal supply of electricity to Bangladesh.

There is a lot at stake for both Bangladesh and Adani Power to sustain this partnership. It is vital for Bangladesh to keep the power grid alive because it has to stop production if factories go outage, it can hurt export and cannot assure basic needs of its population. Adani cannot afford to lose the contract with a high-value client or risk regular payments, both of which are vital for sustaining its international operations and reputation. More broadly, this dispute acts as a wake-up call to countries around the world about what payment security, energy independence and solid planning for global energy shocks demand.