Capacity payments, take-or-pay clauses and sovereign guarantees created fiscal liabilities, committee says

Most of the power sector deals were signed by a nexus of private entities, government higher-ups and bureaucrats during the Awami League regime, found the national committee formed to review the power sector contracts.

The interim government must suspend the inefficient and costly power plants and renegotiate the capacity payment terms with the private power producers as the structure incentivises inefficiency, according to the report of the task force.

Bangladesh has the highest per capita power subsidies among its four neighbouring countries, including India and Pakistan, despite having the second-lowest per capita consumption, according to an analysis by the Bangladesh Independent Power Producers Association (BIPPA).

Private power producers have urged the Bangladesh Bank for a solution to recover losses stemming from delayed payments by the Bangladesh Power Development Board (PDB).

In late November 2023, the Ministry of Power, Energy, and Mineral Resources unveiled the IEPMP.

CPD’s three-step proposal deserves consideration

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The government must phase out inefficient power plants, rethink energy policy

It is worth noting that decisions need to be taken considering the overall scenario, not just the crisis situation.

Adani’s inclusion of costs that appear to be non-existent may allow Bangladesh to claim the deal invalid.