India's Power Export Rules: Recent Amendments and Impacts on Bangladesh

What’s in today’s article?

• Why in News?
• Godda project
• Bangladesh's need for power imports
• Change in India’s power export rules

Why in News?

Recently, an amendment to India’s power export rules was introduced. This amendment is aimed at mitigating political risks in Bangladesh. The amendment allows Indian power exporters to reroute their electricity output to Indian grids if there are delays in payments from partner countries.

Despite this, Adani Power, which operates a plant in Godda, Jharkhand, that supplies all its generated power to Bangladesh, stated that the amendment would not impact its existing contract and reaffirmed its commitment to supplying electricity to Bangladesh.

Godda project

• About
  • The Godda plant is India's first transnational power project, dedicated entirely to exporting electricity to another country.
  • Adani Power's subsidiary in Jharkhand supplies 1,496 megawatts of power to Bangladesh from its ultra super-critical thermal power plant in Godda.
  • This supply is part of a 25-year Power Purchase Agreement (PPA) with the Bangladesh Power Development Board (BPDB) established in November 2017.
• Significance
  • Adani Power highlighted that the power supplied from Godda positively impacts Bangladesh by replacing expensive liquid fuel-based electricity, thereby reducing the overall cost of power in the country.
  • According to BPDB's 2022-23 report, Bangladesh's total installed generation capacity was 24,911 MW as of June 2023, with over 10% (2,656 MW) imported from India.
  • This includes 1,496 MW from the Godda plant, contributing around 6% of the total.
  • India's Ministry of Power emphasized in its 2016 guidelines that electricity exchange across South Asia would foster economic growth and improve the quality of life for all participating nations.
• Criticism
  • Criticisms have arisen regarding the use of coal imported from Australia's Carmichael mine to produce power in India for export to Bangladesh.
  • As per reports, the Power Purchase Agreement (PPA) between Adani Power and Bangladesh allowed the company to pass the high costs of importing and transporting coal, as well as transmitting electricity across the border, onto Bangladesh.
  • In February 2023, United News of Bangladesh reported that the BPDB requested a revision of the PPA.
  • It argued that the $400/MT coal price quoted by Adani Power was excessive compared to the less than $250/MT paid for coal at other thermal plants.
  • Additionally, critics highlighted concerns about the high capacity and maintenance charges imposed by Adani Power, which were considered very high by industry standards, even when no electricity was generated.

Bangladesh's need for power imports

• Bangladesh's need for power imports stems from the underutilisation of its power plants.
• Despite significant progress in expanding electricity access, particularly in rural areas, the country faces fuel and gas supply constraints, leading to underutilisation of its power generation capacity.
• This situation was exacerbated by the global energy crisis following Russia's actions in Ukraine, prompting Bangladesh to seek support from the International Monetary Fund (IMF) in July 2022.
• The country experienced severe blackouts, sometimes lasting up to 13 hours a day, due to difficulties in sourcing enough diesel and gas to meet demand.
• Additionally, Bangladesh-based activists highlight the issue of overcapacity in the country's power sector.
  • As of June 30, 2023, Bangladesh had a total power generation capacity of 28,098 MW, but the highest generation recorded was only 16,477 MW, leaving an unutilised capacity of about 11,621 MW.

Change in India’s power export rules

• The recent regulatory change in India’s power export rules offers greater flexibility to power exporters by allowing them to access the domestic market.
• This will reduce reliance on external markets, and help mitigate risks from instability or economic challenges in neighboring countries.
• The delays in payments have been common due to an internal vetting process within the BPDB, which involves evaluating coal prices and other expenditures before finalizing payments.
• Regarding the potential impact on Bangladesh from this regulatory change, experts highlighted that even if the power supply from India were suddenly halted, the effects would be temporary, lasting only 2 to 3 days, without significant long-term consequences.

Q.1. What are the recent changes in India's power export rules?

India amended its power export rules to allow rerouting electricity to domestic grids if payments from partner countries are delayed. This aims to mitigate risks in politically unstable regions like Bangladesh.

Q.2. How does the Godda project impact Bangladesh's energy needs?

Adani Power’s Godda project supplies 1,496 MW to Bangladesh, helping reduce reliance on expensive liquid fuel-based electricity and lowering overall power costs in the country.

Source: A change in India’s power export rules | Explaine