Andhra Pradesh’s demand for transmission fee waiver troubles Adani solar deal

NEW DELHI: A deal by Adani Green Energy to provide solar power that is already subject to a U.S. bribery investigation, faces a further challenge as its main buyer, the southern state of Andhra Pradesh, has asked for guarantees that transmission charges will be waived, three sources with knowledge of the matter said.

The transmission fee, which could increase the cost of the solar power by around 40%, is mandated by federal law, meaning waiving it would be problematic.

Since April, Adani, which is part of a conglomerate run by one of India’s richest men, has sent many letters urging Andhra Pradesh to begin offtaking power under a 2021 deal, the three sources said.

The deal for 7,000 megawatts of solar power was signed between Andhra Pradesh, Adani Green and the Solar Energy Corporation of India, a government intermediary that is meant to ensure parties abide by their contractual obligations.

Adani green energy says it routinely engages in communication

In its latest letter, Adani said it was ready so far to supply 4,312 megawatts of solar power to the state, the sources added. They asked not to be named because they were not authorised to speak on the matter publicly.

India regulator still reviewing more than a dozen allegations against Adani, sources say

A spokesperson for Adani Green Energy said the company’s entities “routinely engage in communication as part of regular contractual provisions”.

The company remains committed to commencing power supply as soon as the necessary infrastructure is made available, the spokesperson said in a statement to Reuters.

Waiver demand could be a deal breaker?

Andhra Pradesh, which is ruled by a close ally of Prime Minister Narendra Modi, in its first response on September 2 told the Solar Energy Corporation of India that it would not begin offtaking until the intermediary guaranteed an unconditional waiver on inter-state transmission over the 25-year long contract, the three sources said.

They said Andhra Pradesh said in its letter the waiver was an incentive for awarding the contract in 2021 and was available to the project at the time.

The waiver was revoked two years later due to regulatory changes.

Without the waiver, the cost of solar power to the Indian state will rise to nearly 3.49 rupees per unit from 2.49 rupees, the sources said.

One of them said the deal was in question because the government’s solar corporation was not empowered to guarantee or grant a transmission waiver.

The solar corporation and the state chief minister’s office did not reply to emailed requests for comments on the letters whose details have not previously been reported.

US bribery allegations

U.S. authorities in November last year accused Indian billionaire Gautam Adani, together with his nephew and other executives, of involvement in a $265 million bribery scheme to secure Indian power supply contracts in Andhra Pradesh.

The Adani Group denies the allegations. Adani also denied any wrongdoing in June, telling shareholders no individual from the group has been charged under the U.S. Foreign Corrupt Practices Act.

The allegations caused political outcry in the country as the opposition accused the Modi government of shielding Adani and his conglomerate, which spans ports, airports, coal mines and media.

India’s opposition parties have called for an investigation into the Adani Group following the U.S. bribery allegations, but Indian regulators have yet to intervene.

In December, Reuters reported that the solar deal was approved by Andhra Pradesh against officials’ advice.