Explained: How Adani Power’s Supply Cut Impacts Bangladesh’s Crisis-Stricken Economy
Karnataka News
Adani Power’s recent decision to cut its power supply to Bangladesh has intensified the country’s ongoing economic and energy challenges, raising concerns about energy security and financial stability.
Adani Power Jharkhand Limited (APJL), a subsidiary of Adani Power, reduced its electricity supply to Bangladesh by 50%, citing unpaid dues of $846 million. This move has placed additional strain on a nation already grappling with a severe financial and energy crisis.
The supply reduction, which began on Thursday night, has resulted in a power shortfall of more than 1,600 megawatts (MW), with the 1,496 MW Adani plant now operating at half capacity, producing only 700 MW.
As it stands, Bangladesh is facing significant financial pressures, with inflation, currency devaluation, and a foreign exchange crisis undermining economic stability and impacting the daily lives of its citizens.
Impact of Power Supply Reduction on Bangladesh
The timing of the power supply reduction from Adani Power could not be worse for Bangladesh. Amid an ongoing economic downturn, the country is grappling with a surging energy demand driven by rapid urbanization and industrial growth.
Bangladesh relies heavily on imported energy to meet these needs, but the rising global energy prices have made imports increasingly expensive, putting significant pressure on the country’s foreign currency reserves.
With Adani Power now halving its supply, Bangladesh’s energy deficit has worsened, resulting in frequent blackouts that disrupt industries, businesses, and everyday life. The Bangladesh Power Development Board (PDB) has been attempting to settle parts of its outstanding dues, but escalating costs have complicated these efforts.
Adani Power, referring to its Power Purchase Agreement (PPA) with the PDB, reinstated the original coal pricing structure after a temporary price reduction expired. This pricing model is tied to the rising costs of coal from the Indonesian and Australian Newcastle indices, further driving up energy prices for the PDB.
Why Bangladesh Struggled to Clear Adani’s Dues
Bangladesh’s ongoing dollar shortage has significantly worsened its ability to meet financial obligations, particularly to Adani Power. Despite the Bangladesh Krishi Bank agreeing to issue a $170.03 million letter of credit to Adani Power, it has been unable to do so due to limited foreign currency reserves.
The Bangladesh Power Development Board (PDB) has been unable to keep up with Adani Power’s increased charges, as weekly payments fall short, causing the dues to accumulate. As a result, Adani Power has been forced to reduce its output.
The dollar shortage also hampers Bangladesh’s broader economy, limiting its ability to secure vital imports like fuel and food. With foreign reserves dwindling, inflation is rising, making essential goods more expensive for the public.
Adani Power’s supply cut adds yet another layer to these mounting economic pressures, emphasizing the interconnected nature of Bangladesh’s energy needs and its financial stability.
Impact on Bangladesh’s Economy
This development underscores the broader vulnerability of Bangladesh’s economy, which is already grappling with global price hikes, supply chain disruptions, and declining export earnings. Key industries, particularly manufacturing and textiles, which rely heavily on consistent electricity, are likely to face significant challenges. This could further impact exports, a vital revenue stream for the country.
In a nation where reliable electricity is critical for both economic growth and social stability, the reduction in power supply from Adani exacerbates the difficulties Bangladesh faces in maintaining energy security amid an ongoing financial crisis.
As Bangladesh navigates this crisis, concerns are mounting about the long-term stability of its energy agreements. With PDB struggling to meet payment deadlines due to economic constraints, other power suppliers may also reevaluate their terms if financial assurances remain unmet. Adani’s insistence on recovering capacity payments during the supply suspension, as permitted under the Power Purchase Agreement (PPA), raises concerns about potential financial risks if other energy providers decide to follow suit.
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