Prompted by the unpredictable political dynamics in its neighbourhood, India recently tweaked its power export rules to protect the interests of the local players selling electricity to neighbouring countries. Accordingly, it has allowed Indian power exporters to re-route their output to Indian grids if there is a delay in payments from partner countries.
The trigger was the recent developments in Bangladesh. Indian entities supply about 2,656 MW to Bangladesh — NTPC (250 MW + 160 MW + 300 MW); PTC (200 MW); SEIL Energy (250 MW); and Adani Power (1,496 MW).
On August 12, an office memorandum of the Ministry of Power notified amendment in the guidelines for Import/Export (Cross Border) of Electricity, 2018.
For export of electricity it said that Indian generating/distribution companies may export electricity generated from coal, renewables, orhydro-based plants to entities of neighbouring countries directly or through trading licensees of India after due approvals from the relevant authorities.
It further said that in case electricity is generated through coal as a fuel, exports will be allowed only if the plant has used imported coal, spot e-auction coal or coal obtained through commercial mining or from other sources as specified by the government. It also said that such restrictions shall not be applicable for collective transactions through power exchanges in India.
As regards power generated from gas as a fuel, export will be allowed only if the fuel used is imported or gas is from other sources as specified.
On transmission of electricity, it said that generating stations supplying exclusively to neighbouring country may be allowed to build dedicated lines for connecting to the network there in view of technical and strategic considerations. This, of course, is subject to necessary approvals and conditions.
The amendment also allowed that the government may permit connection of such generating station to the Indian grid — inter-State or intra-State — to facilitate sale within India in case of sustained non-scheduling of full or part capacity or default notice by the generator for any default including delayed payment under power purchase agreement.
Observers said, this memorandum prescribes two interesting changes for cross-border trade: Though spot e-auction coal was already available, including coal from commercial mining, the option of “or any other sources as notified” is new and it now opens up for imported gas-based power plants as well.
The second change is allowing re-routing for those who have exclusive network connect for the neighbouring country.
Supply to Bangladesh
Among the Indian entities selling power to Bangladesh, the one with dedicated network is the project of Adani Power. Currently, all players have maintained that they continue to supply power to Bangladesh.
According to Adani Power spokesperson, “Adani Power continues to supply reliable and competitively priced power to Bangladesh in spite of challenges related to its unpaid dues. We are fully committed to meeting our contractual obligations and look forward to similar reciprocity from Bangladesh.”
According to the latest report of the Institute for Energy Economics and Financial Analysis on “How to make Bangladesh’s power sector sustainable” by Shafiqul Alam, Lead Analyst, Energy for Bangladesh: “Sluggish demand growth, high capacity payments and expensive fuels have created financial havoc and a toxic subsidy burden for the Bangladesh Power Development Board (BPDB). From FY 2020-21 to FY 2022-23, the BPDB registered a cumulative loss of Tk148.69 billion ($1.27 billion) even after receiving a hefty subsidy of Tk809.7 billion ($6.88 billion).”
“With base load power plants of more than 5,000 MW coming online soon and increased interest in renewable energy projects, the power system’s capacity will likely cross 35,000 MW in 2030. This capacity will be more than enough to meet the country’s power demand in 2030. Therefore, Bangladesh can stop adding fossil fuel-based power capacity beyond under-construction projects,” the analysis said.
“The existing renewable energy tariff in Bangladesh is half the cost of electricity generated by oil-fired power plants. Solar power for daytime peak application and evening peak use, supported by two- to three-hour battery backups, will allow the BPDB to significantly lower the power generation cost and minimise capacity payments,” it said.
Adani Power supplies power to Bangladesh from its 1600 MW Ultra Super Critical power plant in Godda, Jharkhand, through a dedicated transmission corridor. The plant, which was fully commissioned in July 2023 and uses imported coal, meets significant part of northern Bangladesh’s power demand.
It has invested $2 billion in building this dedicated corridor and associated transmission infrastructure. At the time of commissioning, the company had said that the electricity supplied from the plant shall have a positive impact on Bangladesh’s power situation by replacing costly power generated from liquid fuel and help Bangladesh reduce the average cost of power purchased.
According to sources, Bangladesh has long term PPA ties with four other imported coal-based power generators (Payra, Rampal, Matarbari, and Barisal Electric Power).
“While these plants do not operate if the coal is not supplied by the Bangladesh government by way of US Dollar Letter of Credit or US Dollar upfront payment, Adani station has been continuing to supply power as per the Bangladesh Power Development Board schedule,” a source said.
It is definitely a catch-22 situation for Adani Power as the project is not connected to the Indian network. Besides, it cannot be connected to two systems simultaneously. However, this amendment definitely gives a respite if the space is available in the Indian network and in a worst-case scenario the project can have a line for re-routing if infrastructure is created.
On the face of it, the amendment may seem to have been made to make it easy for projects like Adani Power, but in the long-run, it does shield Indian entities from getting adversely impacted by any political tensions in the neighbouring countries. It also is a signal for policymakers that when framing guidelines for exports/imports all aspects should be factored in from the word go and the players who are investing in the projects should have enough risk-taking appetite.