New Delhi: A controversial solar power deal in Andhra Pradesh involving billionaire Gautam Adani’s renewables company is currently under the spotlight after US prosecutors indicted Adani and seven others for alleged bribery and securities fraud. The $490-million annual contract, signed in late 2021, has sparked questions about rushed approvals, potential financial strain on the state and alleged corruption.
The contract was finalised in just 57 days – a timeframe energy experts and former regulators describe as unusually fast. Documents reveal that political leaders in Andhra Pradesh overruled concerns raised by finance and energy officials to greenlight the agreement, Reuters reported. The deal, which spans 7,000 megawatts, could see as much as 97% of the energy supplied by Adani Green, the renewable energy arm of the Adani Group conglomerate.
A deal pushed through in record time
The Solar Energy Corporation of India (SECI), a federal agency tasked with developing renewable energy, first approached the Andhra Pradesh government on September 15, 2021, with a proposal to sign India’s largest renewable energy contract. SECI’s letter did not name the supplier, but at the time, Adani Green was publicly known as the largest contractor for SECI.
Within a day, Andhra Pradesh’s 26-member cabinet, led by then-chief minister YS Jagan Mohan Reddy, granted preliminary approval for the deal. The Andhra Pradesh Electricity Regulatory Commission followed suit, clearing the agreement by November 11. By December 1, the state signed a procurement deal with SECI, committing to a 25-year contract for solar power priced at Rs 2.49 per kilowatt-hour.
Allegations of bribery and legal fallout
US prosecutors allege that Adani and other defendants offered $228 million in bribes to an unnamed Andhra Pradesh official to facilitate the deal. The indictment accuses the defendants of directing the state’s power distribution companies to purchase the solar power supplied by Adani Green.
The Adani Group has dismissed the allegations as “baseless,” while Adani Green declined to respond to Reuters‘ queries about the corruption claims. SECI stated that states and their regulators decide how much power to purchase but did not address further questions.
Reddy, who lost power in this year’s elections, denied any wrongdoing in a November 28 statement, claiming the deal aimed to provide free power to farmers. His office declined to comment further, Reuters reported.
Concerns over financial impact
Documents and interviews reveal that the Andhra Pradesh finance and energy departments advised against the deal, citing falling solar prices and the likelihood of cheaper agreements in the future, according to the Reuters report. The finance department also questioned the contract’s 25-year duration, given that power supply was scheduled to begin only in 2024. Treasury officials suggested that Andhra Pradesh had leverage as the buyer and could secure better terms.
These concerns were dismissed during a cabinet meeting on October 28, 2021. The minutes note that the cabinet “duly overruled” the finance department’s recommendations without substantial discussion.
A recent analysis by the N. Chandrababu Naidu government found that additional taxes and duties could inflate costs by 23%, pushing the state’s annual payments to Adani Green even higher.
Questionable decision-making
Then-Energy Minister Balineni Srinivasa Reddy told Reuters that he was unaware of the proposal until late on September 15, 2021, when he received a call seeking his signature. He said he was rushed to approve the file without adequate time to study the matter. “Never before” had he been so rushed to approve files, he said, adding that he was unaware Adani was the supplier.
By October 21, the Andhra Pradesh Power Coordination Committee, tasked with evaluating the deal, recommended it proceed. Seven days later, the cabinet officially committed to the agreement, overriding objections from finance and energy officials.
Also read: Gautam Adani as Narendra Modi’s Elon Musk?
The state treasury is now grappling with the financial ramifications. Annual payments for the solar deal, once fully operational, are projected to rival the state’s social security and nutrition programme budgets. The deal risks saddling Andhra Pradesh with financial burdens for decades.
Following the US indictment, Andhra Pradesh’s new government is seeking to suspend the deal, with a decision expected by the end of the year.