Adani’s electricity coming from India without duty-tax!

Illegal discharge of contract

Mahfuz Emran: Bangladesh Power Development Board (PDB) started importing Adani’s electricity from April last year. Electricity imports from India’s Jharkhand center at Godda have to pay a duty of over 31 percent. However, Adani’s electricity imports are not subject to any duty. PDB illegally waived duty-tax in the contract executed in 2017. The National Board of Revenue (NBR) is losing a large amount of revenue due to this.
Following a 2014 notification on electricity imports from India, the PDB sought duty-tax exemption on Adani’s electricity in 2022. Later, the power department sent a letter seeking permission from NBR.
The NBR has written to the power department several times seeking an explanation as to how the contract with Adani was exempted without NBR’s opinion. However, even after more than a year, the power department has not responded to NBR’s letter.
In viewof some of the letters exchanged between the Power Department and NBR. Analyzing these, it can be seen that Adani gave the first letter on June 8, 2022 informing about the duty-tax exemption in the sale of electricity to PDB. In this, according to the agreement executed with PDB and Power Grid Company of Bangladesh (PGCB), duty-tax exemption is sought for the sale of electricity. Adani also requested to take necessary measures for income tax exemption.
In response to Adani’s letter, PDB wrote to the Power Department on July 31, 2022. It said that Bangladesh will import 1,496 MW of electricity for 25 years from the 2,800 MW coal-based power plant under construction by Adani Power (Jharkhand) Limited (APJL) at Gadda, Jharkhand, India, on Built Own Operate (BOO) basis. For this purpose, Power Purchase Agreement (PPA) executed between Adani and PDB and Implementation Agreement (IA) executed between Adani, Government of Bangladesh and PGCB were signed on November 5, 2017. Clause 12.1 of the IA Agreement provides for exemption from all duties and taxes in connection with the sale of electricity by Adani. Bangladesh government will fulfill the responsibility of taking necessary measures or issuing orders for this exemption.
In the letter, PDB also said that NBR had earlier waived import duty and value added tax (VAT) on import of 250 MW of electricity from India’s NTPC Vidyut Nigam Limited (NVVN). Based on the exemption from NBR, another 750 MW of electricity is being imported through import duty and VAT exemption under separate PPAs with India’s PTC India Limited, Sempcorp India and NVVN.
The company will be exempted from all duties and taxes at the import stage as per the signed IA in case of import of electricity from the said plant of Adani Power. In view of this, if we do not consider the issue of all duty waivers at the level of electricity import, the import duty and VAT will be borne by PDB and the Government of Bangladesh as per the agreement. Therefore, taking into consideration the matter under discussion, it is requested to NBR to grant exemption of all duties, VAT, advance income tax and advance trade VAT on import of electricity similar to the exemption given to NVVN in the case of import of electricity in national interest.
In view of PDB’s letter, the Power Department wrote to NBR on August 14, 2022. According to 12.1 of the IA signed with Adani, NBR is requested to exempt Adani Power from all duties and taxes (duty, VAT, advance income tax and advance trade VAT) at the electricity import stage.
NBR sent a counter letter on March 2, 2023 in response to the letter of the Power Department. It is said that a request has been made for duty waiver at the import level on imported electricity from the 1496 MW coal-based power plant under construction at Godda, Jharkhand, India. However, it is requested to inform expeditiously whether any opinion of NBR was taken before execution of the agreement regarding grant of exemption mentioned in the agreement. A copy of the NBR opinion is also requested to be sent if received.
However, the electricity department did not reply to this letter. Later the same year on March 22 and April 13, NBR again sent the same letter to the Secretary of Electricity Department. However, even after more than a year, the electricity department has not given any reply.
To learn about this yesterday, the secretary of the electricity department. When contacted, Habibur Rahman told that the agreement with Adani Power was made in 2016 or 2017. The matter is very old so the matter is not clearly known. He mentioned that NBR had sent a letter last year, but he said that PDB can say it well.
Later PDB Chairman Md. Mahbubur Rahman was contacted but no statement was received. However, multiple senior officials of PDB told on condition of anonymity that duty-tax exemption was granted in the deal with Adani without NBR’s permission. But in fact, it was not even under PDB’s control at the time of the deal in 2017. The agreement was made at the behest of the higher authorities of the government.
When contacted, no official of NBR agreed to comment. According to a source, the Ministry of Power, Energy and Mineral Resources has written to Adani Power Limited for duty waiver on import of 1,496 MW of electricity. A copy of the agreement has also been given with the letter. Section 12.1 of the Agreement deals with exemption from customs duties. That is, the duty exemption has been mentioned in the agreement without informing NBR. NBR has repeatedly written to the Power Department to inform whether the opinion of NBR was taken before the agreement regarding grant of exemption. But no reply was given. As a result, multiple sources confirmed that the officials knew nothing about the exemption.
Meanwhile, the PDB mentioned in its letter the NBR’s 2014 directive to grant duty-tax exemption to Adani, finding the concerned SROT. According to the exemption letter signed by NBR Second Secretary (Tariff Scheme Exemption) NoveraMoazzem Chowdhury, an agreement was signed on January 11, 2010 between Bangladesh and India regarding the import of electricity from India. Accordingly, PDB will import 250 MW of power from India’s NTPC Vidyut Nigam Limited. A total of 31.07 percent customs duty including 5 percent import duty, 15 percent VAT, 5 percent advance income tax and 4 percent advance trade VAT on the imported electricity was waived subject to three conditions. The conditions include customs formalities to be completed at the respective customs station before paying the imported electricity bill. That is, all customs related formalities must be completed including submission of bill of entry for this imported electricity. Each electricity bill (invoice) shall be attested by an officer of the rank of director and original copy and three sets of photocopies of the electricity bill received at the time of tolling shall be submitted.
However, PDB is not following any of these for Adani’s power import. Even through which route Adani’s electricity is coming to Bangladesh, NBR has not been informed. Contacting the concerned customs station of NBR in this regard did not get any information. However, according to PGCB sources, Adani’s electricity enters Bangladesh through Rahanpur in Chapainawabganj and connects to the national grid through Bogra.
Meanwhile, after analyzing the financial report of Adani Power, it has been found that in India’s financial year 2023-24, the income from Godda center in Jharkhand is Rs7,370 crore or about Tk 9,700 crore. Of this, in the first quarter (April-June) Adani sold electricity to Bangladesh worth Rs 2,144 crore.
Analysis has shown that if customs tax was paid at the rate of 31.07 percent on Tk 9,700 crore, NBR would have collected around Tk 3,023 crore of customs tax in a year. However, NBR is being deprived of revenue due to illegal exemption.