Changes in India’s power export rules | Explained

The story so far: August 14, Reuters reported the introduction of an amendment to India’s electricity export rules. The amendment is intended to hedge against political risks in Bangladesh by allowing Indian power exporters to redirect their power exports to the Indian grid in the event of delayed payments from the partner country. Adani Power’s power plant in Godha (Jharkhand) supplies all of its electricity to Bangladesh. In a statement, an Adani Power spokesperson stressed their commitment to supplying electricity to Bangladesh and said the amendment would not affect their existing contracts.

What is the Godda Project?

Adani Power’s subsidiary in Jharkhand supplies 1,496 MW of net capacity to Bangladesh through its ultra-supercritical thermal power plant in Godha. This is achieved under a 25-year power purchase agreement (PPA) signed by the company with the Bangladesh Power Development Board (BPDB) in November 2017.

The Godda power plant is India’s first multinational power project to supply all of its electricity to another country. The power provided by the Godda power plant will replace expensive electricity generated using liquid fuels, positively impacting the power situation in neighboring countries, Adani Power said in a statement on July 15 last year. The company elaborated that this shift will help reduce the average cost of purchasing electricity. According to the Bangladesh Power Development Board (BPDB) 2022-23 annual report, the country’s total installed power generation capacity as of June 2023 was 24,911 MW. Of this, 2,656 MW was imported from India (accounting for more than 10% of the total power generation), and the Godda power plant contributed 1,496 MW (accounting for about 6% of the total power generation).

Regarding power export policy privileges, India’s Ministry of Power said in 2016 when it elaborated on power export guidelines that power exchange in South Asia would promote “economic growth and improve the quality of life in all countries.”

Why has the project been criticized?

The criticisms stem from India’s use of coal imported from Australia’s Carmichael mine to generate electricity for Bangladesh. The thermal power plants use coal as their primary fuel. The Institute for Energy Economics and Financial Analysis (IEEFA) analysed the PPA as early as April 2018, arguing that it allowed Adani Power to “pass on the high costs of importing and transporting coal to India, and the costs of transmitting electricity across the border to Bangladesh”. The Bangladesh United News Service had reported in February 2023 that the BPDB had written to Adani Power, asking for a revision of the PPA. The publication quoted an unnamed official as saying that in the BPDB’s view, the coal price of $400/metric ton was “excessive”, adding that it “should be less than $250/metric ton, which is the price at which we import coal for other thermal power plants”. Another concern, as reported by Bangladesh’s Daily Star in February last year, is the high capacity and maintenance charges, whether generating electricity or not. The report argued that the charges were “very high” by industry standards.

Why does Bangladesh need to import?

The answer is underutilization. In another context, public policy analyst and economist Soumya Bhowmick explains Hinduism Bangladesh has made significant progress in expanding access to electricity, especially in rural areas. However, despite the increase in power generation, India’s South Asian neighbor still faces fuel and gas supply constraints, resulting in underutilization of its power plants. In fact, in July 2022, Bangladesh sought support from the International Monetary Fund (IMF) to mitigate the financial impact of volatile energy prices following Russia’s actions in Ukraine. The country had previously experienced power outages, sometimes lasting up to 13 hours a day, as utilities struggled to obtain enough diesel and natural gas to meet demand, AFP reported.

In addition, Hasan Mehedi, a Bangladeshi activist specializing in power and climate change, also pointed out that “Bangladesh has a serious overcapacity.” Citing official data, Mr. Mehedi pointed out that as of June 30 this year, the country’s total power generation was 28,098 megawatts, of which the peak power generation was 16,477 megawatts, and the unused idle capacity was about 11,621 megawatts.

Where are we now?

Mr Bhowmick said regulatory reforms gave electricity exporters greater flexibility, allowing them to access the domestic market and reduce reliance on external markets. This mitigated risks from instability or economic challenges in neighbouring countries, he explained.

Furthermore, Mr. Mehedi explained Hinduism Delays in payments have become a common occurrence. “Once the bills are submitted to the BPDB, there is a complete internal review mechanism,” he said, elaborating, “BPDB then assesses the open market price of coal and other expenditure prices specified in the bills. It then sends the bills back to the companies for necessary corrections.”

Talking about the possible impact of the latest developments on Bangladesh, Mr. Mehdi said: “Even if the supply is completely disrupted, the impact will only last for 2 to 3 days and not for a long time because of the suddenness of the incident.”