Due to $846 million in outstanding debt, Adani electricity Jharkhand Limited (APJL), a division of Adani Powers, recently cut its electricity supply to Bangladesh in half. The action has put more strain on a nation already dealing with a deepening energy and financial crises.
The cut, which started Thursday evening, has caused Bangladesh to experience a power shortage of more than 1,600 megawatts (MW). The 1,496 MW Adani facility is currently producing only 700 MW at half capacity.
Due to inflation, currency depreciation, and a foreign exchange crisis that are affecting both daily life and economic stability, Bangladesh is currently experiencing severe financial distress.
IMPACT OF POWER SUPPLY REDUCTION
The timing of Bangladesh’s power supply cut couldn’t be worse. Bangladesh’s fast industrialization and urbanization are driving up energy demand amid a slump in the economy.
To meet these demands, the nation mostly depends on imported energy resources; however, due to rising global energy costs, imports have become more expensive, placing a pressure on Bangladesh’s foreign exchange reserves.
Bangladesh’s power shortage has gotten worse after Adani Power cut its supply in half, causing outages that affect homes, companies, and industries.
Although the Bangladesh Power Development Board (PDB) has been making efforts to pay off some of its debt, the process has become more difficult due to growing expenses. After a brief price cut ended, Adani Power returned to its previous coal pricing strategy, citing its Power Purchase Agreement (PPA) with the PDB.
It should be mentioned that the PDB’s energy expenses increased as a result of the initial pricing, which tied coal prices to the growing Australian and Indonesian Newcastle indices.
WHY BANGLADESH STRUGGLED TO CLEAR ADANI DUES
This latest event underscores the wider susceptibility of Bangladesh’s economy, which is experiencing the consequences of worldwide price increases, supply chain interruptions, and diminished export revenue.
Manufacturing and textile production, two sectors that rely heavily on reliable electricity, are probably going to be the most negatively impacted by power outages, which could have an impact on exports, which are an important source of income for Bangladesh.
In a nation whose social stability and economic prosperity depend on a consistent supply of electricity, the Adani Power supply outage may make it more difficult for Bangladesh to maintain energy security in the face of financial hardship.
There are concerns regarding the long-term viability of Bangladesh’s energy accords as it works through this standoff.
Other power providers might reevaluate their terms if financial guarantees aren’t fulfilled, as PDB’s payments are falling behind because of financial limitations. The significant financial dangers that could occur if other energy providers follow suit are highlighted by Adani’s insistence on recovering capacity fees during the supply suspension, which is permitted under the PPA.