Promise of free electricity powered Andhra Pradesh-Adani Green deal

State govt to bear full cost of free power but could not arrange direct supply to rural areas

The erstwhile Andhra Pradesh government under Jagan Reddy had sought regulatory approval for the controversial Adani Green solar power project in 2021, while proposing to offer 7 gigawatt (Gw) of the procured power "for free" to rural areas and agriculture sector, according to filings and submissions reviewed by Business Standard.

 

The regulatory filings made by the state government to the Andhra Pradesh Electricity Regulatory Commission (APERC) and Central Electricity Regulatory Commission (CERC) between 2021 and 2024 reveal the terms of the power sale-purchase agreements which stated rural areas in Andhra would get nine hours of free electricity from the said project.

   

The Andhra government spokesperson did not respond to an emailed query on the fiscal impact of providing 7 Gw of free power to rural areas.  Adani Energy Solutions preferred bidder for HVDC transmission project

 

The power sale agreement (PSA), originally signed by the Andhra government with Adani Green and Azure Power, said: “The primary objective of procurement of solar power under the terms of this tripartite PSA is to provide nine-hour daytime free power to farmers envisaged under the policy of the government of Andhra Pradesh June 2020 while also contributing towards the target of realising 500 GW renewable energy fixed by the Government of India.” 

 

The tripartite PSA is between the Andhra Pradesh state government, its power distribution companies and Solar Energy Corporation of India (SECI), which is a public sector company under the ministry of new and renewable energy. 

In 2019, SECI awarded a solar manufacturing-linked power project to Adani Green and Azure Power. The project is the base of an alleged bribery and fraud investigation initiated by the US Securities and Exchange Commission (SEC) against the two companies. The indictment documents mention Andhra Pradesh as the key bribe beneficiary.

 

During the course of hearings at APERC and CERC between 2021 and 2024, the project faced several legal cases. Payyaula Keshav, who is now the finance minister of Andhra Pradesh and was in the Opposition in 2021, had objected to the project citing violations of the Electricity Act, 2003. He had also opposed it over the cost of power from the project. He has a pending public interest litigation (PIL) on the matter.

 

CERC, in 2022, approved the power purchase agreement (PPA) submitted by SECI for several states including Andhra Pradesh for 8.9 Gw capacity, out of the awarded 12 Gw. Of the 8.9 Gw, 7 Gw was to be purchased by Andhra Pradesh. CERC did not approve the tariff for balance awarded 3.1 Gw as SECI was unable to find buyers for that capacity.

 

According to the regulatory submissions made by SECI in CERC, only Andhra Pradesh agreed to buy at the cheapest rate of Rs 2.49 per unit while other states agreed on Rs 2.61 per unit. These rates are inclusive of the 0.07 per unit trading margin of SECI. The other buyers are Tamil Nadu (1 Gw), Chhattisgarh (0.3 Gw), Jammu & Kashmir (0.1 Gw).

 

The state government, however, was not able to finalise the arrangement for direct power supply to the rural areas from the project. It then sought the supply channel of the distribution companies (discoms), though the state would bear the cost. The state government said a dedicated agency--AP Rural Agriculture Power Supply Company--would supply free power to rural areas.

 

To get regulatory approval for it, Andhra discoms approached the APERC in April 2024 with the same terms of the PSA which the CERC had approved. The state government in the petition said the power supply was estimated to start in a phased manner from September 2024. “The procurement of power under the terms of the tripartite PSA will not cause any burden on the consumers and decrease the financial burden on the government for 25 years while relieving the discoms from the accumulation of subsidy burdens,” it said.

 

APERC, while approving the PSA, said: “The proposed purchase of power will not cause any burden on any consumer category as the purchased power is meant to be supplied to the agriculture sector, the cost of which will be completely borne by the AP State Government. Equally, the existing discoms will also be freed from supplying power from their own resources to the agriculture sector, and eventually, the supply activity will be taken over by the AP Rural Agriculture Power Supply Company.”

 

Andhra Pradesh is looking at options to increase the share of renewable energy to enhance the nine-hour free power supply scheme for the agriculture sector, a scheme that started in the state in early 2000s to enhance the profitability of farmers. Based on the 2011 Census of India, rural population accounts for 70 per cent of Andhra’s total demography.

 

The current chief minister N Chandrababu Naidu after taking charge in June this year had instructed officials of the energy department to ensure supply of power for nine hours to the agriculture sector during day time. He urged them to increase the capacity of the existing feeders and set up special feeders, to manage the rise in the share of renewable energy in power supply.