Andhra Pradesh rush into costly Adani solar deal, overruled officials’ advice

By The Capital

On 18 Dec 2024 11:31:32

Andhra Pradesh rush into costly Adani solar deal, overruled officials’ advice

andhra pradesh solar contract scrutiny adani,andhra pradesh solar contract adani

• Fast-tracked approval for India's largest solar contract

• Finance officials warned solar costs could drop, State had bargaining power

• Ignored warnings and rising costs

• AP seeking to suspend the deal, decision expected by year-end

Varaprasadrao K

New Delhi: Dec 17: Andhra Pradesh's Cabinet, under the leadership of then Chief Minister Y S Jagan Mohan Reddy, overruled advice from its finance and energy departments to sign a massive solar power procurement agreement with the Adani Group, according to State government documents reviewed by Reuters.

The deal, valued at over $490 million annually, is now under scrutiny for alleged corruption and its financial implications on the State. On September 15, 2021, the Solar Energy Corporation of India (SECI) approached the Andhra Pradesh government with a proposal to sign the country's largest renewable energy contract.

Just a day later, the State's 26-member cabinet gave preliminary approval to the deal, despite a prior 10-year forecast by the State's energy regulator indicating no immediate need for solar power. By November 11, 2021, the Andhra Pradesh Electricity Regulatory Commission (APERC) granted regulatory approval, and on December 1, 2021, the State signed a procurement agreement with SECI.

An analysis of the documents shows that 97 percent of the contract’s value would go to Adani Green, the renewable energy arm of Gautam Adani's conglomerate. Energy experts noted that the 57-day timeframe for the deal's approval was unusually rapid, given the complexity and scale of such agreements.

Despite objections from the finance and energy departments, the cabinet pushed the deal forward. Finance officials argued that the State could negotiate better terms due to its bargaining power as a payment guarantor. They also raised concerns about the 25-year duration of the contract, given the industry trend of falling solar prices.

Energy officials supported the finance department’s stance, but their concerns were dismissed. The cabinet minutes show that the treasury’s advice was "duly overruled." The agreed tariff of Rs 2.49 per kilowatt-hour excluded key taxes and duties, potentially inflating costs.

A subsequent analysis by the office of current Chief Minister N Chandrababu Naidu estimated that Andhra Pradesh could end up paying 23 percent more than the contract price, burdening the State treasury with hundreds of millions of dollars annually.

Allegations of corruption The deal has come under the spotlight following a U.S. indictment in November, which alleges that Gautam Adani and seven other executives offered $228 million in bribes to an unnamed Andhra Pradesh official to secure the contract. The indictment further claims that State electricity distribution companies were pressured to purchase power from SECI supplied by Adani Green.

Former energy minister Balineni Srinivasa Reddy, who was part of the Jagan Reddy cabinet, told Reuters he was rushed into approving the deal with little information. "Never before had I been so rushed to approve files," he said, adding that he was unaware the supplier was Adani.

The Andhra Pradesh Power Coordination Committee (APPCC), tasked with studying the proposal, filed its recommendation in just over a month, paving the way for the cabinet’s final approval on October 28, 2021. State Struggles with fallout The current government, under Chief Minister N Chandrababu Naidu, is seeking to suspend the deal in light of the corruption allegations and the mounting financial burden.

A decision is expected by year-end. If the contract proceeds, annual payments to Adani Green would match the State’s entire spending on social security and nutrition programs for the previous fiscal year, raising concerns about the deal’s impact on Andhra Pradesh's finances.

SECI, which facilitated the agreement, stated that it was up to States and their regulators to decide how much power to procure, declining further comment. Adani Group has dismissed the allegations as "baseless," while Jagan Mohan Reddy’s office defended the deal, claiming it ensured free power for farmers.

The Andhra Pradesh Electricity Regulatory Commission (APERC), responsible for scrutinizing the deal, has not commented on its processes or the allegations. The lack of transparency has drawn criticism from independent experts, who question the thoroughness of the due diligence process.