Bangladesh sees energy crisis, trade hit as Adani cuts electricity exports over pending dues

New Delhi, Nov 05: Bangladesh, which has been grappling with an energy supply for months is facing a serious electricity shortage due to Adani Power’s decision to cut electricity exports over outstanding dues of nearly $850 million.

With a November 7 payment deadline looming over the administration on one side and pressure from the industrialists and business houses on the other side, Bangladesh is rushing to meet its debt obligations to Adani Power, which exports power to Dhaka from its 1,600 MW Godda plant in Jharkhand State.

At the same time, Bangladesh’s garment sector, suffering from delays in delivery of their final products that account for 80% of the nation’s exports has been rerouting shipments through the Maldives instead of Indian ports, reflecting tense bilateral relations and supply chain disruptions.

Power Crisis in Bangladesh

Electricity shortages in Bangladesh have reached severe levels, impacting millions of residents and business houses, particularly in rural areas. Production in seven of Bangladesh's coal-based power plants has fallen to around 3,199 MW from a potential 7,099 MW, partly due to foreign currency or dollar shortages affecting coal procurement.

For example one of their main power-producing plants, the 1,200 MW Matarbari plant, a crucial player in the energy grid, has been operating at half capacity and recently shut down altogether due to the shortage of coal supplies. It is expected to remain offline until mid-December, causing additional strain on the energy supply.

Adani Power’s Godda plant, Bangladesh’s largest single power source, recently halved its output from 1,496 MW to 724 MW as Bangladesh missed an October 31 payment deadline. Despite efforts by the Bangladesh Power Development Board (BPDB) to secure a $170 million letter of credit, the terms did not align with the power purchase agreement, triggering Adani’s supply cut to half.

Since June, Bangladesh’s power sector has also struggled with gas shortages. Technical defects with one of the two floating storage and regasification units have limited gas imports to 600 million cubic feet per day, down from the usual 1,100 million, compounding the supply deficit as reported by the local media.

The power crisis has wreaked and damaged local industries reliant on steady electricity, from food storage to manufacturing. For instance, spoilage of temperature-sensitive goods, such as produce, is widespread. Some warehouse owners report losing volumes of inventory, with electricity cuts preventing climate control equipment from running effectively. In some areas, power is cut for up to an hour every few hours, reducing productivity and increasing costs for businesses already struggling to maintain profitability amid rising global costs.

Bangladesh’s reliance on coal and gas imports has long rendered it vulnerable to global price swings and dollar shortages, especially since its foreign exchange reserves have been hit by rising import costs and inflationary pressures.

Currently, Bangladesh owes Adani Power around $846 million, a sum that has accumulated due to a combination of rising costs, currency depreciation, and an insufficient dollar supply. As payments fell from the usual $90-100 million per month to $20-50 million, Adani’s debt grew.

Adani’s power deal with Bangladesh, signed in 2015, was one of the many under Sheikh Hasina, which the current interim government has called opaque. A national committee is now reassessing 11 previous deals, including the one with Adani, which has often been criticised as expensive.

Besides Adani Power, other Indian state-owned firms also sell power to Bangladesh, including NTPC Ltd and PTC India Ltd. Power Development Board officials confirmed that partial payments of money owed to other Indian power suppliers are also being made.

Garment Industry - Shift to the Maldives Route

In the garment industry, delays in production due to energy shortages have disrupted the supply chain. For an industry contributing around 15% of Bangladesh’s GDP, interruptions are not only economically devastating but also risk damaging relationships with international clients. The energy crisis has intensified at a moment when global economic conditions are already challenging, and the need for operational efficiency is paramount.

Bangladesh has chosen to reroute its garment shipments through the Maldives, bypassing India. Traditionally, Bangladesh’s garment factories which are known as manufacturing hub for global brands were shipped to Indian ports, where they were transferred onto international carriers. However, political friction with India has altered these trade dynamics. Bangladesh officials say the decision to avoid Indian ports is a move to minimise delays and lower costs and not political.

As reported by a Bangladeshi daily newspaper, Daily Star quoting Kabir Ahmed, president of the Bangladesh Freight Forwarders Association, shipment costs through the Maldives are now $3–$3.50 per kilogram, compared to $6.30–$6.50 through Dhaka’s Shahjalal International Airport or Indian airports. The Maldives route has proven faster and cheaper, offering a crucial alternative as Bangladesh struggles to manage its export logistics in the face of political and infrastructural hurdles.

This shift has financial implications for India. The loss of Bangladeshi garment shipments reduces revenue for Indian ports and airports that previously handled these goods. This change could disrupt the broader supply chain for Indian companies with operations in Bangladesh.

Industry experts in Bangladesh suggest Bangladesh’s trade redirection is partly motivated by a desire to regain control over its supply chain and partly because of the uncertainty in the political relationship between India and Bangladesh.

Bangladesh’s shift in trade routes and energy struggles reflect deeper political shifts. The recent ouster of former Bangladeshi Prime Minister Sheikh Hasina, currently residing in India amid an arrest warrant, has further strained the close ties between the two nations.

Hasina’s removal marked a significant political change, one that has affected not only Bangladesh’s internal affairs but also its diplomatic posture. The International Crimes Tribunal of Bangladesh issued the arrest warrant in October, sparking public protests and demonstrations that disrupted trade routes and logistics infrastructure, including the Dhaka and Chattogram ports.

As the world’s second-largest garment exporter, Bangladesh faces immense pressure to stabilise its energy supply to maintain production and shipping schedules. The industry’s 4.3% drop in export revenue to $44.47 billion in the past fiscal year as reported by the regional media reflects the compounding challenges the sector faces, from power cuts to rising shipment costs.

The two countries have traditionally maintained a robust economic relationship, with India acting as a critical partner in Bangladesh’s garment industry. The impact of Bangladesh’s decision to reroute its exports through the Maldives will likely prompt the Indian government to reassess its logistical and diplomatic approach.

Bangladesh’s current situation marked by fiscal, infrastructural, and political stresses serves as a reminder of the interconnectedness of economic resilience, energy security, and diplomatic stability. How it addresses these issues will likely shape its path forward, both within the South Asian region and on the global stage.