Editorial of the Day (20th Aug): India’s Power Export Rules

Context: According to Reuters, India introduced an amendment to its power export rules to hedge against political risks in Bangladesh.

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• The amendment allows Indian power exporters to redirect their output to Indian grids if there is a delay in payments from partner countries.
• Despite the amendment, Adani Power, which operates a power plant in Godda, Jharkhand, and supplies all its generated power to Bangladesh, stated that the amendment does not affect its existing contract with Bangladesh.

About the Godda Project

• Operates: an ultra-supercritical thermal power plant in Godda.
• Net Capacity: 1,496 megawatts (MW).
• Signed: The plant exclusively supplies power to Bangladesh under a 25-year Power Purchase Agreement (PPA) signed with the Bangladesh Power Development Board (BPDB) in November 2017.
• Significance: The Godda plant is India’s first transnational power project where all generated power is exported to another country.
• Impact: The electricity supplied from Godda helps reduce Bangladesh’s reliance on costly power generated using liquid fuel, thereby lowering the average cost of power purchased.
  • As of June 2023, Bangladesh’s total installed power generation capacity was 24,911 MW, with 2,656 MW (over 10%) imported from India, including 1,496 MW (about 6%) from the Godda plant.

Criticisms of the Project

The project has faced criticism for using coal imported from the Carmichael mine in Australia to produce power for Bangladesh.

• This has raised concerns about the high costs of importing and transporting coal into India.
• In February 2023, United News of Bangladesh reported that the BPDB requested a revision of the PPA, arguing that the coal price quoted at $400 per metric ton (MT) was excessive and should be reduced to less than $250 per MT, in line with other thermal plants in Bangladesh.
• The Bangladesh-based Daily Star reported that the capacity and maintenance charges imposed by the project were considered “very high” by industry standards, regardless of whether the plant generated electricity.

Bangladesh’s Need for Power Imports

• Underutilisation of Domestic Capacity: Despite significant progress in expanding electricity access, especially in rural areas, Bangladesh continues to face fuel and gas supply constraints, leading to underutilisation of its power plants.
• Energy Crisis: In July 2022, Bangladesh sought support from the International Monetary Fund (IMF) due to financial shocks from volatile energy prices, exacerbated by the Russian invasion of Ukraine.
  • This led to blackouts lasting up to 13 hours a day as utilities struggled to source enough diesel and gas.
• Overcapacity: Bangladesh’s power generation capacity as of June 30, 2023, was 28,098 MW, but the highest generation recorded was only 16,477 MW, leaving an unutilised capacity of 11,621 MW.

Current Situation and Potential Impacts

• Regulatory Change: The recent amendment to India’s power export rules provides greater flexibility to Indian power exporters by allowing access to the domestic market, thereby reducing dependence on external markets and mitigating risks associated with economic challenges in neighbouring countries.
• Impact on Bangladesh: Delays in payments are common, and the internal vetting process by the BPDB includes evaluating coal prices and other expenditures before bills are cleared.
  • If the power supply from India were to stop suddenly, it would have a short-term impact of 2 to 3 days but is unlikely to cause long-term disruptions.

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