‘We have to take legal and…’ into account: Andhra government unlikely to scrap power pacts linked to Adani Group

Concerned about the financial implications and legal ramifications, the Andhra Pradesh government is unlikely to quickly scrap or suspend power purchase agreements linked to Adani Group entities, a senior state cabinet minister told Informist. “We must also consider the legal and financial implications before considering canceling the agreements,” said Finance Minister Payyavula Keshav, declining to comment further as the matter is before the courts. “We need to look at all aspects of the issue before deciding anything. We are watching,” he said.

In December 2021, the Andhra Pradesh government signed power purchase agreements with public sector Solar Energy Corp. of India Ltd. to purchase up to 7,000 megawatts of solar energy in phases over 25 years. Under the agreement, Solar Energy Corp. buying the solar energy from Adani Group companies.

The total deal size, after completion of the 25-year contract period, and subject to fulfillment of committed capacity delivery, was estimated at Rs 1.05 lakh crore, a state power department official said. Andhra Pradesh had agreed to pay Rs 2.49 per unit to Solar Energy Corp., which amounted to Rs 4,233 crore per year, the official said. While Solar Energy Corp. 7 paise as trading margin, Rs 2.42 would go to the Adani group companies for every unit they supply to state-owned electricity distribution companies, the official said.

Senior Telugu Desam Party leader and now state minister Keshav, who was then chairman of the state Public Accounts Commission, had challenged the agreements in the Andhra Pradesh High Court. The case is still pending in court.

He refuted media reports quoting him as saying that the Andhra Pradesh government is likely to suspend power purchase agreements with the Adani Group. He said since he was the petitioner, the matter is sub-judice and he cannot comment further. He said that given the nature of the pact, it has a huge financial impact on the state treasury, and the government should think carefully before making a decision.

Expressing a similar view, a top official of the state energy department said if the government cancels the power purchase agreements, it will have to pay nearly Rs 3,000 crore as compensation or penalty to Solar Energy Corp. with one of the Adani Group companies. As a nodal agency, SECI (Solar Energy Corp.) has obligations with solar energy producers and supplies to state distribution companies. Adani group companies have no direct agreements with state-owned companies,” the official said.

Following the US indictment alleging that the Adani Group paid bribes of up to $265 million to Indian officials to secure the power purchase agreements, speculation has been rife that the Andhra Pradesh government could abandon the pacts. Between 2021 and 2022, the Adani group received contracts from Solar Energy Corp. for providing solar energy to states like Odisha, Tamil Nadu, Chhattisgarh and Andhra Pradesh.

Solar power supply is yet to commence as the agreements are subject to approval by the Central Electricity Regulatory Commission, the official said.

In 2019, the YS Jagan Mohan Reddy-led government in Andhra Pradesh terminated solar and wind power contracts signed by the N. Chandrababu Naidu government. Following a lawsuit led by the National Solar Energy Federation of India, the state government paid nearly Rs 6,000 crore as penalty and Rs 3,000 crore as interest to the renewable energy producers, the official said.