Adani Power’s reduced supply to Bangladesh intensifies the country’s economic challenges, heightening concerns about energy security and financial stability.
Bangladesh relies extensively on imported energy resources to fulfill its power demands.
Bangladesh Faces New Economic Strain as Adani Power Slashes Supply Amid Unpaid Dues
Adani Power Jharkhand Limited (APJL), a subsidiary of Adani Power, recently reduced its power supply to Bangladesh by 50%, citing outstanding dues of $846 million. This move has exacerbated the economic challenges Bangladesh faces, already strained by inflation, currency devaluation, and an ongoing energy crisis.
The power supply cut, which began Thursday night, has created a shortfall exceeding 1,600 megawatts (MW) in Bangladesh, with the Adani Power plant now operating at just 700 MW of its 1,496 MW capacity. This reduction worsens an already critical situation as the country struggles to meet its energy needs amid soaring global fuel prices and dwindling foreign reserves.
Growing Demand, Shrinking Resources
Bangladesh’s rapidly urbanizing population and expanding industries are driving an ever-increasing demand for energy. However, the country’s reliance on costly imported fuel has drained foreign currency reserves, making it difficult to secure necessary imports. With Adani Power’s supply cut, Bangladesh now faces severe power outages affecting businesses, industries, and households across the nation.
Why Bangladesh Can’t Pay Adani’s Dues
A severe dollar shortage has crippled Bangladesh’s ability to clear Adani’s dues. While Bangladesh Krishi Bank committed to issuing a $170.03 million letter of credit to Adani Power, the funds remain unavailable due to limited dollar reserves. Rising coal prices, tied to global indices like the Indonesian and Australian Newcastle benchmarks, have further pushed energy costs higher, burdening the Bangladesh Power Development Board (PDB) and complicating payment settlements.
Impact on Key Sectors of the Economy
This power shortfall poses significant risks to key economic sectors. The textile and manufacturing industries, which rely on steady electricity, are likely to face disruptions that could threaten Bangladesh’s crucial export revenues. Additionally, inflation continues to rise as foreign reserves dwindle, making essential imports like fuel and food even more costly.
Wider Implications for Bangladesh’s Energy Stability
The recent power cut not only underscores Bangladesh’s energy vulnerability but also raises concerns about the stability of its long-term energy agreements. If financial constraints persist, other energy suppliers may reconsider their terms, increasing the risk of similar supply cuts in the future. Adani Power’s insistence on collecting capacity payments despite reducing supply, as allowed under its Power Purchase Agreement, could signal a trend where energy providers prioritize financial assurances over supply continuity.
Conclusion
With the power supply disruption and Bangladesh’s economic challenges intensifying, the country’s path to energy security and financial stability remains uncertain. This crisis highlights the interconnected nature of energy agreements and economic resilience, as Bangladesh now grapples with mounting challenges in its quest for sustainable growth and social stability.
