A Reuters investigation report shows a significant cause for concern with regards to the solar power purchase agreement by Andhra Pradesh from Adani Green Energy. The investigation alleges that the then-Jagan Mohan Reddy-led government ignored warnings issued by finance and power department officials. These officials had cited the agreement as financially infeasible and potentially disastrous to the state exchequer.
An investigation by Reuters suggests that, should the deal be executed, Andhra Pradesh would incur an annual burden amounting to the same it spends annually on key social security and nutrition schemes when power supply is fully realized. The report also posed several questions in regard to the 'miraculous' approval pace of the agreement which, in itself, had hinted at irregularities.
Cabinet Greenlights Deal in Record Time
The Solar Energy Corporation of India (SECI) approached the Andhra Pradesh government on September 15, 2021, with the proposal for the country's largest renewable energy purchase agreement. Despite the state electricity regulatory body having earlier claimed that Andhra Pradesh did not have an immediate requirement for solar power, the state cabinet gave its nod to the deal the very next day, according to Reuters' review of cabinet documents.
Importantly, the letter from SECI did not explicitly mention the name of the supplier. But it is common knowledge that at the time SECI had engaged with only two suppliers who were connected with the Adani Group. In less than 57 days, the Andhra Pradesh Electricity Regulatory Commission gave approval for the 7,000-megawatt deal. By December 1, 2021, the contract, valued at approximately $490 million annually, was sealed. In the deal, 97% of the value benefited Adani Green.
Allegations of Bribery and Fraud
Reuters reported that U.S. prosecutors indicted Adani and seven executives in November for alleged bribery and securities fraud. The indictment charges the defendants with offering $228 million to a senior Andhra Pradesh official to secure an approval of the agreement. Allegations have further deepened scrutiny over the deal.
Jagan Mohan Reddy’s Office Remains Silent
Confronted with serious allegations, Jagan Mohan Reddy's office provided Reuters with a statement on November 28, defending the deal on the grounds of delivering free electricity to farmers. However, the office did not respond to other specific questions about the agreement.
Former Power Minister Feigns Ignorance
Then-power minister Balineni Srinivasa Reddy told Reuters he was not aware of any details about the deal. Correspondingly, the Finance Ministry and the Power Department raised objections because of the financial implications of the contract signed for 25 years, which may lead the electricity prices to fall considerably before the contract comes into effect in 2024.
Concerns Over Financial Burden
Independent energy and legal experts, and those government officials interviewed by Reuters, all panned the financial implication of the deal. A review of 19 internal government documents exposed that the political leadership paid deaf ears to repeated warnings from its departments about the impending deal becoming a heavy burden on the state's finances.
Excess Power Capacity
The deal also raised concerns over Andhra Pradesh purchasing thousands of megawatts of electricity that the state does not require. Critics argue that taxpayers would ultimately bear the brunt of these unnecessary expenditures.
Adani Group’s Response
Adani Green has termed all the allegations as baseless. The group said that decisions on power purchase are taken by state governments and regulators. SECI, however, refused to respond to specific questions from Reuters regarding the speed of approvals and corruption allegations.
Conclusion: A Looming Financial Crisis
If the Adani power deal materializes, it will impose a significant financial burden on Andhra Pradesh, crippling its ability to fund other welfare programs. The status of the agreement remains undecided despite severe criticism and scandals of corruption. The lack of transparency and accountability from concerned quarters has further fueled public trust, making this a big issue for the state's administration and its citizens.
