Merchant Power Policy Topples Protected IPP Era

Bangladesh's interim government accuses Adani Power of breaching a 2017 power deal by withholding tax benefits from its Godda plant, which supplies energy to Bangladesh at significantly higher costs than similar deals.

The Payra Thermal Power Plant in Patuakhali has temporarily halted operations for maintenance and to facilitate the test commissioning of a nearby $2.5 billion coal-fired power plant by RPCL-Norinco International Power Limited (RNPL). The new 1,320 MW plant, located two kilometers away, will undergo testing of its transmission lines, requiring a shutdown of the Payra-Gopalganj line for up to 75 days.

The National Board of Revenue (NBR) has revoked the indefinite tax exemption on loan interest for SS Power Limited, a subsidiary of S Alam Group, effective January 2024. The exemption, granted since March 2019, ends following an SRO issued on 17 December.

Tripura is owed Rs 161 crore by Bangladesh for power supplied, according to Power Minister Ratan Lal Nath. Despite supplying 60-70 MW of power, Bangladesh has failed to clear its dues. The minister emphasized that the state government can only communicate with Bangladesh through NTPC Vidyut Vyapar Nigam Limited.

Bangladesh's power sector faces significant challenges despite massive investments.  Overcapacity and low demand, especially during winter, lead to substantial losses. Industries, hindered by energy shortages, operate below capacity, impacting overall economic growth.

The IMF has urged Bangladesh to hike electricity tariffs and cut subsidies as part of reforms tied to a proposed $3-billion loan, supplementing the previously granted $4.7 billion. During discussions with the Bangladesh Power Development Board (BPDB) and Ministry of Finance (MoF), IMF emphasized transitioning to a non-subsidy economy. The government, currently allocating Tk 360 billion for electricity subsidies, faces challenges from costly independent power producers (IPPs) and rental plants.