Modi Government Amends Electricity Act: Tightens Cross-Border Electricity Exports to Bangladesh Amid Economic and Social Turmoil

New Delhi, August 16, 2024 — The Government of India, led by Prime Minister Narendra Modi, has introduced significant amendments to the Electricity Act, 2003, tightening the rules governing cross-border electricity exports. In a move that could have wide-reaching implications, the new amendment allows Indian power companies to discontinue electricity supply to Bangladesh in the event of non-payment of dues.

The amendment marks a decisive shift in India's approach to cross-border energy trade, emphasizing the importance of financial security and contractual compliance. The Ministry of Power, in a statement, highlighted the need to protect the interests of Indian power companies, which have faced payment delays from some international clients. The new provisions empower these companies to take decisive action in case of non-payment, including halting electricity exports.

“The amendments are designed to safeguard the financial interests of our power sector while ensuring that our neighbors adhere to agreed terms of trade,” said R.K. Singh, India’s Minister of Power. “This is not just about money; it’s about maintaining trust and responsibility in international trade.”

The amendment comes at a challenging time for Bangladesh, which is grappling with an economic crisis. The country’s annual inflation rate soared to an alarming 11.66% in July, the highest in 12 years. This sharp rise in inflation has been accompanied by widespread anti-Hindu violence, creating a volatile environment that has further strained the country’s resources.

The economic turmoil in Bangladesh has raised concerns about the country’s ability to meet its financial obligations, including payments for electricity imports from India. Bangladesh is heavily reliant on India for its electricity supply, and any disruption could exacerbate the existing energy shortages, impacting millions of citizens and industries.

The Modi government’s decision to tighten rules on cross-border electricity exports is seen as a response to these growing risks. Indian officials have expressed concerns about the financial stability of some of India’s energy trade partners and the potential impact on the domestic power sector.

The new rules require more stringent financial guarantees from importing countries and establish clearer protocols for addressing payment delays. In the case of Bangladesh, Indian power companies now have the legal backing to suspend electricity supply if payments are not made on time.

While the amendment is aimed at protecting India’s financial interests, it could have diplomatic repercussions. India and Bangladesh share a strong historical relationship, with cooperation across various sectors, including energy. The decision to allow power companies to cut off supply could strain this relationship, particularly at a time when Bangladesh is facing multiple crises.

Bangladesh has not yet officially responded to the amendment, but experts suggest that the move could lead to tensions between the two nations. “Energy trade is a critical component of India-Bangladesh relations. Any disruption in supply could have serious implications, both economically and diplomatically,” said Prof. Harsh V. Pant, an expert in international relations.

The amendment to the Electricity Act represents a significant shift in India’s energy trade policy, reflecting the Modi government’s focus on securing national interests. As Bangladesh navigates its economic and social challenges, the impact of this decision will be closely watched, with potential consequences for regional stability and bilateral relations.

The Modi government’s decision underscores the growing complexities of cross-border energy trade and the need for robust legal frameworks to manage risks in an increasingly interconnected world.