Andhra Pradesh’s $490M Solar Deal With Adani Was Approved Despite Officials' Advice (image-X/IndianTech)

Hyderabad, Andhra Pradesh: A massive solar power deal between the state of Andhra Pradesh and Adani Green, a renewable energy unit of billionaire industrialist Gautam Adani’s conglomerate, is facing intense scrutiny following bribery allegations and concerns about the state’s finances.

In 2019, the state’s energy regulator had stated in its ten-year forecast that it had no short-term need for solar power and should aim for other renewable energy sources that provide 24-hour supply.

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On September 15, 2021, the Solar Energy Corporation of India (SECI) initiated a deal which was approved by Andhra Pradesh’s 26-member state cabinet, led by then CM YS Jagan Mohan Reddy, just a day later. The agreement, potentially worth over $490 million annually, committed the state to purchase 7,000 megawatts of solar power from Adani Green, according to Reuters.

At the time, although the SECI’s September list did not mention the energy supplier, it was widely and publicly known that it had contracted only two suppliers. The larger was billionaire Gautam Adani’s firm, stated The Economic Times.

The state government secured the nod from Adani Green on November 11 and on December 1, the state signed a procurement agreement with SECI for the deal. Nearly 97 percent of the $490 million will go to Adani Green, according to documents, reviewed by Reuters.

Within the span of 57 days, the deal was done. The speed of approval and the state’s long-term financial burden raised alarms, although timeframes for such deals can vary.

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US prosecutors indicted Adani and seven other executives in November for allegedly bribing an unnamed Andhra Pradesh official to secure the deal. According to court documents, $228 million was offered to the official to direct the state’s electricity distribution companies to purchase the power supplied to SECI by Adani.

Despite previous advice from energy and finance officials cautioning against the contract, citing the state’s lack of short-term need for solar power and potential cost savings, the Andhra Pradesh cabinet approved the deal swiftly.

Following a review of 19 state government documents and interviewing more than a dozens of state and federal officials, many of whom wished to remain anonymous, Reuters reported that political leaders ignored advice from finance and energy officials to approve the huge Adani deal.

Some officials argued that the state government may be paying more than necessary due to rapidly declining solar prices and concerns that the contract failed to account for taxes and duties. Estimates suggest the state could pay up to 23 percent more than the agreed price once these additional costs are factored in.

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The Andhra Pradesh state government’s decision to approve the deal came just weeks after SECI’s proposal, with key officials expressing concerns over the lack of time for proper due diligence.

Energy Minister Balineni Srinivasa Reddy, who signed the deal, stated he was unaware of the deal on September 15 until he received a call and was told to sign the deal. Reddy claimed he had not been given sufficient details or time to review the matter.

By October 21, the Andhra Pradesh Power Coordination Committee (APPCC) filed a report recommending the deal. The APPCC includes the state’s top energy official and company executives.

A week later, the state cabinet officially committed to procuring 7,000 megawatts from SECI, overriding objections from finance and energy departments, which questioned the long-term financial implications of the deal.

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On October 28, the day the cabinet approved the deal, the finance department made a submission to the cabinet stating there was an industry trend of falling solar prices and that future agreements would likely be cheaper, according to cabinet minutes.

The state will pay 2.49 rupees per kilowatt-hour when the solar power comes online, based on the agreement.

Andhra Pradesh is now seeking to suspend the contract in light of the ongoing legal investigation into Adani’s alleged bribery scheme. The state’s financial obligations, once the power is supplied, are expected to be substantial, with annual payments potentially equaling the state’s total expenditure for the previous year’s social security and nutrition programs.

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In a previous report by The Reporter’s Collective, it was revealed that the central agencies allegedly played an instrumental role in it via a solar power auction. Through tweaking auction rules and limiting competition, the SECI allegedly ensured that Adani Group got its hands on the solar power projects, which enable the firm to earn over Rs 1.5 lakh crores in revenue over 25 years.

Gautam Adani, his nephew Sagar Adani, and other associates were accused by US authorities of alleged corruption involving $265 million in bribes to secure solar power contracts across Indian states.