The Indian Adani Group has sought a 60 per cent increase in price of coal for the power plant from which it will export electricity to Bangladesh. If Adani Power increases the coal price, Bangladesh will have to buy electricity at a higher price.
Adani Power recently sent a request for the Bangladesh Power Development Board (BPDB) to issue the demand note, where the coal price is quoted at $400 per tonne.
The coal price Adani Power has quoted ($400/MT) is excessive - it should be less than $250/MT, which is what Bangladesh is paying for the imported coal at country's other thermal power plants, according to the BPDB.
In this regard, a high-level team of the Indian Adani Group is likely to come to Bangladesh within this month to discuss the coal price and power tariff issue, the BPDB also said.
According to the official sources, the move from the Indian conglomerate came in response to BPDB’s letter sent recently to the Adani Group following a request received in relation to opening LCs (in India) to import the coal that will be used as fuel for the 1,600 MW plant in Jharkhand.
Since practically all the power generated by the plant located in the Godda district of Jharkhand state will be exported to Bangladesh, Adani Power requires a demand note from BPDB that it can present to Indian authorities before opening LCs against the coal import.
Adani now sought a 60 per cent higher price because of a unique PPA provision for fixing the coal price by combining Indonesian and Australian coal prices.
Indonesian coal is much cheaper compared with Australian coal because of their quality difference and energy content.
The PPA permits Adani to buy coal having the calorific value of 4,600 Btu/lb for the Godda power plant at the rate of the coal having the calorific value of 6,322 Btu/lb.
But coal price indexes offer different rates for different qualities of coal and the rates are not proportional to quality changes.
For instance, the price of a tonne of coal in the Indonesia coal index gets halved between the categories of 6,200 Btu/lb and 4,600 Btu/lb — meaning a 25 per cent fall in energy content.
Meanwhile, the state minister said that electricity from India Adani Group's Jharkhand power plant will be added to the national grid in March as per the agreement.
He said the tariff of Adani's power will be competitive compared with other coal-fired plants like Payra power plant.
"The tariff of Adani power will not be more than the tariff of power from the Payra plant," he said.
He also said about 750 MW will be added to the national grid in March and another 750 MW in April this year.
The power purchase agreement with Adani Power was signed in November 2017, in Dhaka.
The BPDB is working on a number of alternatives to offer Adani so that its coal price could be reduced to ultimately lower the power tariff.
Meanwhile, BPDB has urged Adani Power to consider discounting the variable energy costs on a temporary basis given the current high thermal-sea borne coal prices.
Agreement with Adani in 2017
The current power production capacity of Bangladesh is 22,700 megawatt. On April 16, 2022, Bangladesh produced record power of 14,782 megawatt which was much lower than the total production capacity. Although many power plants are lying idle, the country has to count Tk 20,000 crore annually in capacity charges.
After the Awami League government came to power in 2009, it put emphasis on generating more power. Investments were made in establishing power plants one after another. Along with this, an initiative was taken to import electricity from India. Bangladesh currently imports 1,160MW of electricity from India while under the 2017 agreement, Dhaka is supposed to buy 1,600 MW electricity from Adani Power Ltd for 25 years and start getting electricity from March this year.
As the country had no imported coal-based power plant then, the PDB could not properly scrutinize the issue of coal prices at that time. Adani has had to rely on its experience of owning coal mines and building several large coal-fired power plants in India. Since Payra and Rampal power plants has come into production in the country in 2020, PBDB now has an idea about importing coal.
Electricity Secretary Md. Habibur Rahman told the media that the price of coal in Adani's power plant will hopefully not be higher than that of Payra and Rampal. They also agreed to it in principle. It will be decided before buying electricity. The technical team from Adani Power will come to discuss the issue, he added.
How coal price is fixed
BPDB enters into agreement with all the government-approved power plants to buy electricity. Although the deal is silent about value of per unit electricity, it gets capacity charge specified. However, operation and fuel prices vary depending on production of power.
The power producing companies buy fuel and use it in the plants while BPDB pay for electricity along with price of fuel.
If fuel is procured at higher price, per unit electricity becomes costlier, sources claimed.
Coal price is fixed based on the indexes of Australia and Indonesia which are two major coal exporters. Price of coal is enumerated in the websites of those countries although the same can be imported at lower price by negotiation.
The authorities make an average between the price of Australia and Indonesia to fix the coal rate.
Officials at BPDB and Power Division apprehended that Adani is trying to realize extra money for the purpose of coal.
Conditions of agreement need to be scrutinised
In the last 14 years, the wholesale price of electricity jumped on 11 occasions and retail price on 12 occasions making consumers scapegoats. Even in January, retail price of electricity increased twice by 10 percent. The countrymen suffered a lot due to load shedding just on the eve of winter. So, uncertainty persists in electricity supply in the coming summer. However, the government is asking people not to be worried as Adani will supply soon. The experts argued that conditions of paying capacity charge and affordable price of coal and per unit electricity should have been explicit in the deal.
BDST: 1519 HRS, FEB 08, 2023
MSK/SMS
