Adani Power, the power supplier owned by Indian businessman Gautam Adani, has decided to go to international arbitration to resolve a payment dispute related to electricity supply in Bangladesh, the Adani Group said in a statement on Monday, according to a report by the British news agency Reuters.

It said that Adani Power has chosen international arbitration to resolve a dispute over payment for electricity supply to Bangladesh . The company, led by Indian industrialist Gautam Adani, has been in a long-standing dispute with the Bangladesh Power Development Board (BPDB) over outstanding payments. Adani Power supplies electricity to Bangladesh under a power purchase agreement (PPA) signed between the two parties in 2017.

In a statement, Adani Power said, "There is a disagreement between the two parties regarding the method of calculating and billing costs for certain sectors. In such a situation, both partners have agreed to initiate a dispute resolution process. Both parties are hopeful of a speedy, smooth and mutually beneficial resolution."

However, Fawzul Kabir Khan, an advisor to Bangladesh's Ministry of Power, Energy and Mineral Resources, told Reuters that discussions are still ongoing. "Once the discussions are over, we will go to international arbitration if necessary," he said.

In 2017, Adani Power, a power company owned by Indian billionaire Gautam Adani, signed a 25-year agreement to supply electricity to Bangladesh from its coal-fired power plant in Gadda, Jharkhand.

Adani Power supplies electricity to Bangladesh from its Godda coal-fired power plant, meeting about one-tenth of Bangladesh's total electricity demand.

In a report published in December, Reuters said that Bangladesh's interim government had accused the Adani Group of breaching a contract after the company refused to grant Bangladesh tax breaks it received from the Indian government.

In the 2023-24 fiscal year, Bangladesh paid Adani 14.87 taka (0.122 USD) per unit of electricity, much higher than the average of 9.57 taka for electricity supplied by other Indian companies.

Last week, Adani Power said that the amount owed to Bangladesh has significantly reduced. In May, Adani Power's outstanding amount fell to about $900 million; it had reached about $2 billion earlier this year. Adani's current outstanding amount to Bangladesh is equivalent to about 15 days of customs duties.

In a statement on Monday, the company said Adani Power is committed to the power purchase agreement and will continue to provide reliable, affordable and high-quality electricity to Bangladesh.

• What happened to the tax breaks?
Adani Power's Godda plant runs on imported coal and is supposed to export all the electricity generated to Bangladesh. The company said the agreement with Bangladesh further helps advance India's foreign policy objectives. In 2019, New Delhi declared the Godda plant as part of a special economic zone. As a result, the power plant receives incentives from the Indian central government, such as income tax and other tax exemptions.

In December, Reuters reported that Adani Power and Bangladesh's state-owned power company Bangladesh Power Development Board (BPDB) signed an agreement and implementation agreement on November 5, 2017, requiring Bangladesh to promptly notify them of any changes in the power plant's tax rates. Adani also promised to provide "tax exemptions" from the Indian government.

But Adani Power did not do so. On September 17 and October 22 last year, BPDB sent two letters to Adani. The letters called for an adjustment in the price of electricity supplied to Bangladesh in return for the benefits received from the Indian government. Although these agreements and letters were not publicly available, Reuters reported at the time that it had seen them.

Two BPDB officials, who declined to be named as they were not authorized to speak to the media, said that despite sending two letters, they have not received any response from Adani Power.

Officials said that BPDB estimates that Bangladesh will save about 0.35 cents per unit of electricity if the electricity price is calculated according to the tax exemption that Adani Power received from the Indian government.

Reuters has seen a summary from the Bangladesh government on electricity purchased from the Godda plant. According to the summary, 8.16 billion units of electricity were supplied to Bangladesh from the Godda plant as of June 30, 2024. If tax exemptions were adjusted, this electricity would have saved Bangladesh about $28.6 million.

Source: Reuters.