IPP Payment Disputes in Bangladesh: Arrears, the Power Contract Review and Remedies in 2026

IPP payment disputes in Bangladesh: arrears, review and remedies in 2026

IPP payment disputes in Bangladesh have become a balance-sheet problem for the whole power sector. BPDB officials put the Bangladesh Power Development Board's arrears to power producers at BDT 437.75 billion at the end of June 2026, after a peak above BDT 500 billion in February 2026.[1] At the same time, the National Review Committee's January 2026 report on contracts signed under the old special power law has put tariffs, capacity charges and the Adani power purchase agreement under formal scrutiny.[5]

This guide is for independent power producers, their lenders and the contractors and suppliers who depend on them. It explains how large the arrears are and why they recur, where the payment obligation sits in the contract structure, what the review committee found, how renegotiation pressure is being applied, which limitation and notice deadlines matter, and how the domestic, SIAC and ICSID routes compare. Our wider energy arbitration guide covers upstream, LNG and price-review disputes; this article stays with unpaid power bills.

Summary: BPDB owed power producers about BDT 438 billion at end-June 2026, and the review of special-law contracts has given the state arguments to resist or reduce some claims. Producers that keep a clean receivable record, reserve their rights, protect limitation and pick the right forum early will recover more, and faster, than those who wait for a negotiated settlement.

Key point: The repeal of the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act 2010 saved contracts signed under it, while preserving the government's right to review them in the public interest. Unpaid invoices therefore remain contractual debts, but each one now has to be defended against review-based challenges, deductions and time bars.

At a glance

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Table of Contents

IPP payment disputes in Bangladesh: the 2026 picture

Payment delay is not new in the Bangladeshi power sector, but its scale and its politics changed between 2024 and 2026. Three things now happen at once: arrears accumulate because BPDB's revenue and subsidies do not cover its purchase costs; the state reviews contracts awarded without competitive tender under the 2010 special law; and producers face deductions and disputed liquidated damages that shrink the bills BPDB accepts as due.

How large the arrears are

On 19 April 2026 the Power, Energy and Mineral Resources Minister, Iqbal Hassan Mahmood, told Parliament that outstanding power plant bills stood at Tk 52,300 crore as of 9 April 2026, covering government and private plants and electricity imports.[2] His breakdown included about Tk 17,358 crore in capacity and fuel payments to gas and fuel-oil IPPs, about Tk 15,453 crore for coal prices and capacity payments to joint venture and IPP coal plants, and about Tk 3,892 crore for electricity imports from India.[2] The minister also put total bank loans taken by power plants at Tk 1,49,311 crore, which explains why arrears quickly become a banking problem.[2]

By end-June 2026, according to BPDB officials quoted by Bonik Barta, arrears stood at BDT 437.75 billion for electricity bought between December 2025 and June 2026. They had exceeded BDT 500 billion in February 2026, fell by nearly half after the elected government took office, and then started rising again.[1] The same report put the amount owed to Summit at about BDT 50 billion and to United Group at about BDT 32 billion, and recorded that private producers wanted at least five months of arrears cleared, plus a commitment to regular payment, before raising furnace-oil output.[1]

Why arrears keep returning

The structural cause is a pricing gap. In June 2025 the Financial Express reported that BPDB buys power from private plants at Tk 14 to Tk 26 per kWh, against an average bulk tariff of Tk 7.04, and that nearly Tk 600 billion had been released as subsidy in FY2024-25 to pay arrears to rental and independent power producers.[12] Capacity payments rose from Tk 62.41 billion in FY2019 to Tk 260 billion in FY2023.[12] In 2026 the gap widened again as LNG shortfalls, delayed subsidy releases and slower bill settlement combined.[1]

For producers, the lesson is that arrears are cyclical, not exceptional. A payment strategy has to assume that the next shortfall will come and that the state will use every contractual and review-based argument available to manage it.

Where the payment obligation sits in the contract structure

Every IPP payment claim starts with the documents, and most IPP payment disputes in Bangladesh turn on them. Most Bangladeshi IPPs sit inside a familiar structure: a power purchase agreement with BPDB, an implementation agreement with the government, a fuel supply agreement, and finance documents that assign the project's receivables to lenders.

The power purchase agreement

The PPA sets the capacity payment for availability, the energy payment for electricity dispatched, the billing cycle, the payment period and the late-payment charge. Producers' association BIPPA has said publicly that its members' PPAs require settlement within 40 days, while actual payment was running eight to ten months late.[3] The size of the late-payment charge is itself now in dispute: in the Adani case, BPDB objects to a 2% monthly surcharge, which the Financial Express calculated at nearly 27% a year.[10]

The implementation agreement and sovereign support

The government's support sits in the implementation agreement and, where given, a guarantee of BPDB's obligations. In June 2026 the Energy Minister told Parliament that contracts with private power companies cannot be cancelled at will because they are backed by sovereign guarantees, which makes termination lengthy and complex.[11] For producers and lenders, that statement matters: it confirms that the state treats the guarantee as binding, and it frames the government's strategy as negotiation rather than termination.

Deductions, liquidated damages and disputed bills

Not every unpaid amount is a simple arrear. Before the change of government, BPDB's chairman said bills would be paid only once liquidated damages calculations were final, and that some claims might not hold after adjustment. BIPPA called the retroactive calculation of liquidated damages absurd, said producers had lost a challenge before the Bangladesh Energy Regulatory Commission, and had taken the issue to the High Court.[3] A producer's receivable is therefore often three things: an undisputed sum, a disputed deduction and a contested late-payment charge. Each needs its own strategy.

The National Review Committee findings

The review is the single biggest change to the risk profile of IPP payment disputes in Bangladesh since 2024, because it gives the state an evidential basis for arguments that go beyond ordinary billing disputes.

The committee and its report

A five-member national committee was formed on 5 September 2024 to review contracts made under the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act 2010, chaired by a retired High Court Division judge, Justice Moinul Islam Chowdhury. It submitted its final report to the Ministry of Power, Energy and Mineral Resources on 20 January 2026 and presented its findings on 25 January 2026.[5]

Sector-wide findings

As reported, the committee found that BPDB's payments to independent power producers rose eleven-fold between FY2011 and FY2024 while generation rose four-fold, that BPDB's losses exceed BDT 500 billion a year, and that idle capacity costs an estimated USD 900 million to USD 1.5 billion annually with system utilisation of only 40 to 50 per cent.[5] The Daily Star had earlier reported BPDB data showing capacity charges of about Tk 130,000 crore paid over fifteen years, about Tk 32,000 crore of it in FY2023-24.[4]

Findings on the Adani agreement

The committee's most specific findings concerned the 25-year PPA between BPDB and Adani Power Jharkhand for supply from the Godda plant in India. It reported that the contracted tariff of 8.61 US cents per unit had risen to 14.87 cents in 2025 through the operation of contractual clauses, at an estimated additional cost of USD 400 million to USD 500 million a year.[5] It said it had found evidence of irregularities and illegal transactions involving several individuals, referred material to the Anti-Corruption Commission, and recommended arbitration in Singapore and cancellation, while leaving the decision to the elected government.[5] [7]

The Business Standard reported the recommendation as a choice: renegotiate the coal pricing formula or cancel if Adani declines to revisit it.[6] The committee also flagged clauses that require Bangladesh to bear losses arising from political factors within India.[7] Adani said it had not received any official communication about the report.[5] These are findings of a review body, not of a court or tribunal, and Adani's position is that the PPA operates in its favour.[10]

The legal status of the review

The review sits on a specific legal foundation. On 14 November 2024 the High Court Division declared two provisions of the 2010 Act unconstitutional, including the bar on challenging actions under it in court, while condoning actions already taken in good faith. The interim government then repealed the Act by ordinance, providing that contracts signed and actions taken under it remain lawful, but preserving the government's right to review them and act in the public interest.[4]

What the findings change for payment claims

For most producers, the report does not by itself reduce any invoice. The PPA remains valid unless set aside or renegotiated, and the savings clause protects it. What changes is the defence landscape. Expect BPDB to rely on review findings to justify tariff reopening, to question late-payment charges, to resist enforcement on public-policy grounds, and in the most serious cases to allege illegality or corruption in the making of the contract. Producers should audit their own procurement history now, before those arguments are raised in a hearing.

Renegotiation pressure in 2026

The elected government's approach, as stated in Parliament, is to negotiate rather than terminate. That makes renegotiation, not litigation, the first battleground in most IPP payment disputes in Bangladesh.

The government's stated position

In June 2026 the Energy Minister said the government was negotiating with private power companies on several issues, "particularly late payment fees, which we are refusing to pay", and that as long as contracts remain valid it would try to reduce prices.[11] He also said no quick rental plants had active contracts, that two rental plants had been renewed on a "no electricity, no payment" basis, and that action was being taken on the reports of two committees that reviewed special-law contracts.[11]

The Adani track, from mediation to SIAC

The Adani dispute illustrates how a payment claim escalates. On 21 May 2025 Adani Power invoked the PPA's dispute clause and asked BPDB to appoint a mediator within fifteen days; under the agreement, mediation is a mandatory but non-binding step before arbitration.[8] In October 2025 Adani wrote that USD 262 million of USD 496 million outstanding was undisputed and that non-payment of the undisputed sum gave it a contractual right to suspend supply. On 19 November 2025 the High Court Division stayed the arbitration until a court-mandated inquiry reported.[9]

After the review report, BPDB appointed London King's Counsel to represent it in the SIAC process at the end of January 2026, and the first SIAC hearing was reported to begin in the first week of August 2026, attended by the Attorney-General.[8] [10] BPDB's case, as reported, is that the coal benchmark inflates the tariff, the late-payment surcharge is excessive, and Indian tax exemptions were not passed on.[10]

Negotiating without giving away the claim

Renegotiation is not risk-free for producers. A tariff concession, a waiver of late-payment charges or a revised payment plan can operate as a variation or a settlement of accrued claims unless it is carefully drafted. Conduct talks on a without-prejudice basis, record expressly that accrued rights are reserved, tie any concession to defined payment milestones, and make the concession lapse automatically if BPDB defaults. Lenders' consent will usually be required under the finance documents before any amendment is signed.

Limitation and notice deadlines

Deadlines are where long-running IPP payment disputes in Bangladesh are quietly lost. When arrears roll on for months, the oldest invoices can become time-barred while the parties are still negotiating.

Limitation applies to arbitration

Section 55 of the Arbitration Act 2001 applies the Limitation Act 1908 to arbitrations under the Act as it applies to court proceedings, and treats an arbitration as commenced on the date fixed by section 27.[13] Unless the parties agree otherwise, that is the date on which the respondent receives a notice requiring the dispute to be referred to arbitration.[13] The Limitation Act itself requires a claim brought out of time to be dismissed even if limitation is not pleaded.[14] Where a PPA is governed by Bangladeshi law, a foreign-seated tribunal is likely to be asked to apply the same periods.

Every invoice has its own clock

Each unpaid invoice normally falls due, and starts its own limitation period, on the contractual payment date. A producer owed twelve months of bills therefore has twelve separate deadlines, not one. Diary them individually, and file a notice of arbitration for the oldest well before the first expires, even if talks continue on the rest.

Acknowledgments and part payments

Section 19 of the Limitation Act gives a fresh period from a written acknowledgment of liability signed by the debtor before the period expires, and section 20 does the same for a payment on account acknowledged in writing.[14] BPDB reconciliation statements, letters confirming undisputed amounts and payment advice referencing specific invoices can all serve this purpose. Ask for them, file them and map each to the invoice it covers.

Contractual notice and tiered dispute clauses

Most PPAs add contractual steps before arbitration: notice of dispute, senior-level negotiation, expert determination for technical issues, or mediation, each with its own window. The Adani PPA's fifteen-day period to appoint a mediator is a typical example.[8] Missing a step can give the other side a jurisdictional objection; letting a step run indefinitely can cost limitation. Section 55(3) allows a court to extend a contractual time bar for commencing arbitration where justice requires, but that is a remedy to avoid needing.[13]

The table compares the main routes. On a phone, scroll it sideways.

Arbitration routes: domestic, SIAC and ICSID

The forum is usually fixed by the PPA, but producers, sponsors and lenders often have more than one route, and the choice affects interim relief, enforcement and the influence of domestic proceedings.

Domestic arbitration under the Arbitration Act 2001

The Arbitration Act 2001 applies where the seat is in Bangladesh.[13] Section 7A allows the court, or the High Court Division in an international commercial arbitration, to grant interim measures before or during the arbitration and until enforcement, including injunctions against transfers intended to frustrate enforcement and the appointment of a receiver.[13] An award can be challenged within sixty days of receipt, before the District Court or, for an international commercial arbitration seated in Bangladesh, the High Court Division.[13] Our guide to setting aside arbitral awards covers the grounds.

SIAC and other foreign seats

Foreign sponsors' PPAs commonly choose Singapore. For a foreign-seated award, the 2001 Act applies only its recognition and enforcement provisions: the award is enforced by execution as if it were a decree, and refusal is limited to the listed grounds, including public policy.[13] Where the award debtor has applied to set the award aside at the seat, the Bangladeshi court may adjourn enforcement and order security.[13] The November 2025 stay of the Adani arbitration shows a separate risk: domestic courts may be asked to restrain a foreign arbitration while a public-interest inquiry runs.[9] Our SIAC arbitration guide covers procedure.

ICSID and investment treaty claims

Foreign investors may also have a treaty route where a bilateral investment treaty between Bangladesh and the investor's home state gives consent to ICSID arbitration. The route is not theoretical: in January 2026 Petrobangla's chairman said an ICSID tribunal had ordered Niko Resources to pay USD 42 million to Bangladesh over the Chhatak blowouts.[8] A treaty claim targets state conduct, such as legislative tariff cuts, discriminatory treatment or measures amounting to expropriation, rather than a bare failure to pay a bill. It should be assessed early, because restructuring the investment after a dispute arises rarely secures treaty protection. See our ICSID investment arbitration guide.

Courts and the regulator

Domestic courts and the regulator remain relevant even where the PPA provides for arbitration. The liquidated damages dispute went first to the Bangladesh Energy Regulatory Commission and then to the High Court Division.[3] Producers should decide early whether a regulatory challenge helps or hinders the contractual claim, because findings in one forum can be relied on in the other.

What IPPs should do now

For producers, the priority in IPP payment disputes in Bangladesh is to turn a political problem back into a documented contractual claim.

• Build a receivable ledger. List every invoice by date, due date, amount, disputed and undisputed portion, deductions applied and any acknowledgment received.
• Separate the undisputed sum. Demand it in writing and, where the PPA allows, use non-payment of undisputed amounts as the trigger for contractual remedies, as Adani did.[9]
• Reserve rights on every payment. Accept part payments expressly on account, without waiver of late-payment charges or disputed sums.
• Handle suspension rights with care. A threatened shutdown is powerful leverage but carries regulatory, reputational and termination risk; take advice before serving notice.
• Prepare for review-based defences. Gather tender, approval and pricing records now, since review findings may be used to argue illegality or public policy.

The sequence below is how we take a producer from arrears to a protected claim.

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What lenders should do now

Local and foreign lenders sit behind most IPP receivables. With total bank loans to power plants put at Tk 1,49,311 crore in April 2026, payment delay feeds directly into loan classification and liquidity.[2]

• Review the security package. Confirm that receivables, PPA rights and any guarantee proceeds are validly assigned, and that notices of assignment have been served on BPDB.
• Use the direct agreement. Where one exists, check cure periods, step-in rights and the lender's right to be notified of any PPA amendment or termination.
• Control renegotiation. Make consent to any tariff concession or waiver conditional on a payment plan and on preservation of accrued claims.
• Watch limitation on the borrower's claims. A borrower that lets invoices become time-barred is destroying the lender's collateral.

Our guide to project finance in Bangladesh covers security structures in more depth.

What contractors and suppliers should do now

EPC contractors, O&M operators and fuel suppliers usually contract with the IPP, not with BPDB, so their claim is against the producer even where the root cause is BPDB's arrears. Check whether the subcontract contains pay-when-paid language, and how it is drafted, before accepting delay. Preserve suspension and interest rights, and diary limitation on each unpaid invoice. Where the subcontract has no arbitration clause, the claim will usually be a commercial dispute for the Commercial Courts; our guide to the Commercial Courts Act explains that route, and our article on unpaid infrastructure project claims covers related strategy.

Critical mistakes in IPP payment disputes in Bangladesh

• Treating arrears as one debt. Each invoice has its own due date and limitation clock.
• Signing concessions without reservation. A waiver of late-payment charges can extinguish accrued claims.
• Letting tiered clauses drift. Mediation and negotiation windows must be started and closed on time.
• Ignoring the review. Expect public-policy and illegality arguments, and prepare the procurement record.
• Bypassing lenders. Amendments without consent can trigger finance-document defaults.
• Leaving enforcement until the award. Identify assets and interim relief options at the outset.

Outlook: what to watch into 2027

Four developments will shape IPP payment disputes in Bangladesh over the next year. The first is the outcome of the Adani SIAC proceedings, which will be the first major test of review findings in an international tribunal.[10] The second is the government's negotiation on late-payment fees and tariffs, and whether it is concluded by agreement or by unilateral measures.[11] The third is fiscal: subsidy releases and arrears clearance determine whether the cycle eases or repeats.[1] The fourth is the High Court Division's treatment of the liquidated damages challenge.[3] TRW's international arbitration team advises producers, sponsors, lenders and contractors on each of these tracks.

Frequently asked questions

How much does BPDB owe power producers in 2026?

BPDB officials put arrears at BDT 437.75 billion at end-June 2026, after a peak above BDT 500 billion in February 2026.[1]

What did the National Review Committee find?

It reported a steep rise in IPP payments relative to generation, high idle-capacity costs and, for the Adani PPA, a tariff rise to 14.87 cents per unit and evidence it considered sufficient to justify cancellation and arbitration in Singapore.[5]

Are contracts signed under the 2010 special power law still valid?

Yes. The repeal ordinance saved contracts and actions under the Act, while preserving the government's right to review them in the public interest.[4]

Can the government cancel an IPP contract?

The Energy Minister told Parliament in June 2026 that contracts backed by sovereign guarantees cannot be cancelled at will and that termination is lengthy and complex, so the government is negotiating instead.[11]

Is the government paying late-payment charges?

The minister said in June 2026 that the government is refusing to pay late-payment fees while it negotiates with private producers.[11]

Does limitation apply to an IPP's arbitration claim?

Yes for arbitrations under the Arbitration Act 2001, which applies the Limitation Act 1908 and treats arbitration as commenced when the respondent receives a notice to refer the dispute.[13]

Can a producer restart limitation on old invoices?

A written acknowledgment of liability signed by the debtor, or a part payment acknowledged in writing, before the period expires starts a fresh period.[14]

Can a SIAC award against BPDB be enforced in Bangladesh?

A foreign award is enforced by execution as a decree, subject to limited refusal grounds including public policy, and the court may adjourn enforcement and order security if a challenge is pending at the seat.[13]

Where is the Adani payment dispute now?

After a High Court stay in November 2025 and the review report in January 2026, the first SIAC hearing was reported to begin in early August 2026.[9] [10]

Can foreign IPP sponsors bring an ICSID claim?

Potentially, where a bilateral investment treaty gives consent and the complaint concerns state measures rather than a simple unpaid bill. ICSID proceedings involving Bangladesh are established, as the 2026 Niko award shows.[8]