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Rushed Approvals, Alleged Corruption Plague Adani Solar Deal in Andhra Pradesh: Report

State finance and energy departments had cautioned against the deal, citing declining solar energy costs and the potential for better agreements in the future.

Rushed Approvals, Alleged Corruption Plague Adani Solar Deal in Andhra Pradesh: Report

Former Andhra CM Jaganmohan Reddy (left) and Gautam Adani. Graphics: The Crossbill.

A $490-million-per-year solar power contract between the Andhra Pradesh government and billionaire Gautam Adani's renewable energy company is facing intense scrutiny after US prosecutors indicted Adani and seven others on charges of bribery and securities fraud.

Signed in late 2021, the agreement has raised concerns over alleged corruption, expedited approvals, and the financial strain it may impose on the state, Reuters reported.

The Solar Energy Corporation of India (SECI), a federal agency promoting renewable energy projects, approached the Andhra Pradesh government on September 15, 2021, proposing what would become India’s largest renewable energy deal.

The supplier wasn’t explicitly named in SECI’s proposal, but Adani Green, the renewables arm of the Adani Group, was widely recognized as the likely contractor.

A day later, the state cabinet, led by then-Chief Minister Y.S. Jagan Mohan Reddy, granted preliminary approval.

By November 11, the Andhra Pradesh Electricity Regulatory Commission endorsed the agreement, and on December 1, a 25-year contract was signed with SECI at a tariff of Rs 2.49 per kilowatt-hour. Experts and former energy regulators have criticized the 57-day timeframe as unusually hasty for a deal of this magnitude.

According to US prosecutors, Adani and other defendants offered $228 million in bribes to an unnamed Andhra Pradesh official to facilitate the deal. The indictment also claims the defendants directed the state’s power distribution companies to purchase solar power exclusively from Adani Green.

The Adani Group has dismissed the allegations as baseless, while SECI stated that states independently decide how much power to procure.

Former Chief Minister Jagan Mohan Reddy, who lost power in this year’s elections, denied any wrongdoing, asserting that the contract aimed to provide free electricity to farmers.

State finance and energy departments had cautioned against the deal, citing declining solar energy costs and the potential for better agreements in the future. Treasury officials also flagged the 25-year duration of the contract, particularly since power supply was only set to commence in 2024.

These warnings were dismissed during a cabinet meeting on October 28, 2021, with the minutes noting that objections were overruled without substantial discussion.

A review by the former N. Chandrababu Naidu government revealed that additional taxes and duties could inflate project costs by 23%, significantly increasing the state’s annual payments to Adani Green. The deal’s financial obligations now threaten to rival Andhra Pradesh’s social welfare budgets, raising concerns about the long-term economic impact.

Former Energy Minister Balineni Srinivasa Reddy told Reuters he was unaware of the proposal until he received a late-night call on September 15, 2021, urging him to sign off on the file. He described the process as unusually rushed, adding that he was not informed about Adani Green being the supplier.

Despite these concerns, the Andhra Pradesh Power Coordination Committee recommended moving forward with the deal on October 21, and the cabinet gave its final approval just seven days later.

The deal’s financial repercussions are becoming increasingly apparent as the state treasury struggles with mounting obligations. Annual payments for the project could jeopardize funding for critical social programs, including nutrition and social security.

Following the indictment by US authorities, the new Andhra Pradesh government is exploring options to suspend or renegotiate the agreement. A decision is expected by the end of the year.

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