Adani seeks fresh relief for $2 billion SEZ plant amid Bangladesh payment woes

Adani Power Ltd is seeking concessions from the Indian government to sustain operations at its $2 billion coal-based power plant in eastern India. The 1.6-gigawatt facility, located in a special economic zone (SEZ), has been grappling with delayed payments from Bangladesh, its sole electricity buyer, and regulatory hurdles for domestic sales.

In August, the Indian power ministry permitted Adani to sell electricity from the plant within India. However, its SEZ location complicates domestic distribution, as electricity produced in such zones is classified as imported, thereby attracting additional taxes.

Adani has reportedly requested the trade ministry to waive this classification and allow the sale of power in India without import duties. According to sources familiar with the matter, the company is also seeking an extension of the customs duty waiver on imported coal used as fuel for the plant.

These regulatory adjustments are critical to making power affordable for Indian consumers, particularly in a highly price-sensitive market. Without these exemptions, selling electricity domestically could prove unviable.

As stated by Adani executives during an October investor call, the plant, which meets about 10 per cent of Bangladesh's electricity demand, had accumulated dues of approximately $790 million as of September. Payments from Bangladesh have begun to trickle in, but the backlog remains substantial.

The delays stem from Dhaka’s efforts to renegotiate a power purchase agreement signed under the previous government, which faced corruption allegations and was ousted earlier this year. While Adani remains hopeful of resolving the payment crisis, the company has not ruled out exploring alternatives, including linking the plant to the Indian grid.

Nishit Dave, Adani’s head of investor relations, indicated during the investor call that linking the facility to India’s grid is not currently necessary but could be considered if the situation worsens.

The challenges surrounding this plant add to ongoing controversies for the Adani Group, which is facing legal scrutiny in the United States over alleged bribes of $250 million. The group has denied these allegations and announced its intention to defend itself legally.

Adani is not alone in facing regulatory challenges associated with SEZ regulations. India’s solar manufacturers raised similar concerns in 2020 when proposed import taxes on solar cells and panels threatened to make locally-produced modules from SEZs more expensive for the domestic market. These issues led some manufacturers to establish production facilities outside SEZs to avoid such complications.

Adani’s situation underscores the broader need to revisit SEZ policies, particularly in the energy and manufacturing sectors, to ensure operational flexibility and market competitiveness.