Indian power exporters exporting energy to Bangladesh are facing rising financial strain as dues from the Bangladesh Power Development Board (BPDB) exceed $1 billion.

According to The Hindu Business Line, numerous suppliers, including SEIL Energy India and PTC, are considering invoking BPDB's sovereign guarantee to recover outstanding payments.

Adani Power, one of the five Indian firms supplying power to Bangladesh, recently received partial payments totaling $70 million, but this is much less than the $90-100 million billed per month.

SEIL Energy India, which supplies 250 MW directly and an additional 200 MW through PTC, is owed over $190 million for the past eight months alone.

The current total outstanding balance for Adani Power stands at $850 million.

Concerns over payment crisis

The overdue payments are part of a broader issue in Bangladesh, as authorities are struggling with foreign currency shortages and economic instability.

BPDB has been making intermittent payments to some international suppliers, including Indian companies, but these are insufficient to cover even daily charges, according to the Business Line.

Business Line reported, citing several sources close to the matter, that if the situation persists, power exporters may be left with no choice but to invoke the sovereign guarantee offered during the signing of the long-term power purchase agreements.

Banking partner Rupali Bank has acknowledged the outstanding amounts and confirmed that they are working to secure foreign currency to make the overdue payments.

However, the delays continue to deepen concerns among Indian suppliers, who are responsible for meeting their own financial obligations to creditors and lenders.

Sovereign guarantee and Letter of Credit (LC)
Under the terms of the power agreements, BPDB is obligated to settle its dues within five business days of receiving a letter of credit (LC).

Should the BPDB fail to honor the LC within this period, suppliers such as SEIL and PTC have the right to invoke the sovereign guarantee, triggering legal and financial recourse.

Although Adani Power has stated that it is currently "waiting and watching" the situation, other companies have already begun issuing demand notices after repeated delays in payment.

Impact on energy sector
The payment crisis comes at a time when Bangladesh is facing significant economic challenges, including currency devaluation and fiscal instability.

The authorities are currently negotiating with international lending agencies for financial support, but securing loans solely to stabilize the energy sector may not be enough to address the broader fiscal issues.

Bangladesh requires substantial budgetary support to avoid further economic fallout, according to analysts.

Indian suppliers are now ramping up efforts to recover their dues.

Despite the pressing situation, both Indian and Bangladeshi authorities are hopeful that BPDB will make the necessary payments, as it has done sporadically in recent months.

However, if these payments do not materialize soon, the sovereign guarantee will likely be invoked, marking a significant escalation in the financial dispute between India and Bangladesh in the energy sector.