Politics
Adani, A Shrewd Businessman Or A Hurt Man? Will Andhra Pradesh Be Handed An Exorbitant ₹850 Crore Bill For Power?
Could Adani have actually extracted his pound of flesh amid the bribery charges, the focal point being the power to be supplied to Andhra Pradesh from the Gujarat-based solar power project.
When Andhra Pradesh signed up for solar power from Adani Green Energy Limited (AGEL) through SECI’s (Solar Energy Corporation of India Limited) manufacturing-linked solar scheme, the deal sounded promising.
The ₹2.49 dream is slowly fading, replaced by the reality of an extra ₹850 crore per year. The Andhra Pradesh Power Coordination Committee (APPCC) flagged this in 2021, predicting that duties and taxes could push the tariff higher. They weren’t wrong. The BCD, coupled with GST, is expected to add ₹0.429 per kWh from duties and another ₹0.12-0.15 per kWh from GST.
How Did We Get Here?
Blame it on timing or poor foresight, but when Andhra Pradesh inked the power supply agreement in December 2021, the customs duty wasn’t yet in force. Come April 2022, the duty hit, and SECI informed the state that this cost would be passed on. Andhra Pradesh agreed—though perhaps reluctantly.
If the state were to buy power today, it could get it for an all-inclusive ₹2.50 per kWh. But being tied into the Adani-SECI agreement means paying the premium.
The Cloud of Corruption
As if rising tariffs weren’t enough, the project is now under international scrutiny. The U.S. Justice Department alleges that a senior Andhra official was offered kickbacks totaling ₹1,750 crore between 2019 and 2024 to facilitate these deals. This has fueled suspicions over whether the rising costs were a calculated move or simply unfortunate timing.
Former Chief Minister Y.S. Jagan Mohan Reddy has dismissed these allegations as baseless, calling the agreements “steps towards wealth creation.” He defended the deal, citing long-term savings, particularly with the inter-state transmission system (ISTS) waiver, which he claims will save the government ₹1 lakh crore over 25 years, plus ₹4,440 crore in immediate ISTS waivers.
But the contract raises several red flags, which warrant a closer look. Here are some of the key concerns:
1. Tariff Escalation Due to Basic Customs Duty (BCD) and GST
Issue: Initially, the tariff was supposed to be ₹2.49 per kWh. However, with the imposition of BCD and GST, the tariff increases to ₹3.069 per kWh, over a 50-paise hike. This is a significant increase for a long-term contract.
Concern: Why wasn’t the risk of BCD factored into the initial pricing or agreement terms? Passing such a substantial cost to the state may indicate poor risk management or possible oversight during negotiations. Was the Andhra Pradesh government fully aware of these cost escalations before signing?
2. Timing of the Customs Duty Notification
Issue: The duty was notified after the power purchase agreement (PPA) and power supply agreement (PSA) were signed but before the project’s commissioning.
Concern: Shouldn’t SECI or Adani Green Energy Limited (AGEL) have included a clause to hedge against policy changes? This delay in notification raises questions about transparency and foresight in the contractual process.
3. Alleged Bribery Charges
Issue: The U.S. Justice Department’s indictment, claiming that kickbacks were offered to an unnamed Andhra official between 2019 and 2024, casts a shadow over the contract’s integrity.
Concern: If proven, this bribery scandal undermines the legitimacy of the agreement. Given the scale of the alleged ₹1,750 crore in kickbacks, it’s worth investigating whether these financial incentives influenced the state’s willingness to accept higher tariffs.
4. Waiver of Inter-State Transmission System (ISTS) Costs
Reddy’s Defense: The waiver could save over ₹4,440 crore, with additional long-term savings of ₹1 lakh crore.
Concern: While this is a significant benefit, does it offset the increased tariff from the customs duty and GST? Is the ISTS waiver binding and secure over the 25-year contract term, or is it subject to future policy changes?
5. Public Scrutiny and Transparency
Issue: The involvement of a major corporation like Adani, combined with allegations of corruption, raises public accountability concerns.
Concern: Has the government adequately communicated the long-term financial impacts to the public? Additionally, why is there such a stark contrast between the ₹2.50 per kWh tariff currently available and the ₹3.069 per kWh under this agreement?
These are valid reasons to question the transparency, fairness, and long-term viability of this contract. The combination of tariff escalation, policy-driven cost shifts, and allegations of corruption suggests that further investigation or renegotiation might be necessary to protect public interest.
A Pound of Flesh or Fair Business?
Adani Group is known for its sharp business acumen. Passing on the BCD costs might be seen as a logical move from a corporate perspective, but for Andhra Pradesh, it feels like a raw deal.
Hence, what began as a clean energy initiative is now clouded by allegations of corruption and rising costs, leaving citizens and politicians questioning: Is Adani simply being a savvy businessman, or is this a case of corporate overreach?
This solar deal has sparked more heat than light. Whether it’s Andhra Pradesh footing a higher bill or Adani defending its business model, the whole thing is shrouded in darkness!