Over the past seven years the Narendra Modi government has entered into several dubious agreements in the realm of the energy sector which were tailor-made to provide astonishingly high profits to the Gautam Adani promoted power producing companies. This story analyses one such decision that will impose a heavy financial burden on the people of Gujarat even as Adani will walk away with an excess profit of Rs 23,625 crores over the next 25 years.
In 2006, when Gujarat was in dire need of power the Gujarat Urja Vikas Nigam Limited (GUVNL) decided to call on private companies to produce 3000MW electricity for the state. It signed two Power Purchase Agreements (PPAs) with the Adani group for production of 1000MW each and the rate at which the electricity was to be purchased was decided at Rs 2.89 per unit and Rs 2.35 per unit respectively. In the first case, the electricity was to be produced using imported coal while in the second it was to be produced using a mix of imported coal and coal mined in the country. However, just before the deal with Adani, GUVNL had signed an agreement with the Coastal Gujarat Power Project, a Tata Group company, for purchasing power at the rate of Rs 2.26 per unit, in this case too, imported coal would be used to produce electricity. This higher rate of purchase from the Adani group has cost the state a loss of Rs 1347 crore in the past two years, and over a period of 25 years a staggering loss of Rs 23,625 crore.
The Narendra Modi government’s decision to pay a higher price to the Adani group is nothing short of a scam. All the more, when smaller producers are ready to supply electricity at the rate of Rs 2.20 per unit, a much more competitive rate. Why this largesse towards the Adani group?
Gulail sent detailed questionnaires to Adani and GUVNL on this issue. Both parties failed to respond.
Arjun Modwadia, an ex-MLA from Porbandar in Gujarat had this to say, “There have been back-channel deals between Adani and Narendra Modi. On the one hand land was bought at cheap rates from people in Mundra and given to Adani to set up its projects and on the other despite all the subsidies the power is bought from them at higher prices. The fact is that the Gujarat government is working in collusion with the Adani group.”
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HOW GUJARAT WILL SUFFER
• Power being bought at Rs 2.89 per unit from Adani Power Limited while Coastal Gujarat Power Project is supplying at the rate of Rs 2.26 per unit – 63 paisa more per unit is being paid to Adani.
• Adani has supplied 7000 million units and 14393 units in 2011 and 2012 respectively causing the state a loss of Rs 441 crore and Rs 906 crore respectively – a total loss of Rs 1347 in two years.
• If 15,000 million units are bought from Adani over the next 25 years the loss to Gujarat would amount to Rs 23,625 crore[/jbox]
Let’s consider the implications of this deal with the Adani group. As per the first agreement with Adani Power Limited, the supply of 1000MW is to be done at the rate of Rs 2.89 per unit while the agreement with the Coastal Gujarat Power Project requires it to supply 600MW power at the rate of Rs 2.26 per unit – a difference of 63 paise per unit between the two. Simple calculations show that for supplying 7000 million units of power in 2011 and 14,393 units of power in 2012 the GUVNL has ended up paying Rs 441 crore and Rs 906 crore more to Adani Power Limited in the previous two years respectively – a total profit of Rs 1347 crore for the Adani group.
Hence over a period of 25 years, at the same rate, if Adani Power Limited supplies 15,000 million units of power to the GUVNL it would mean a net loss of Rs 23,625 crore to Gujarat. While this would mean an undue profit to Adani Power Limited, it would also impact the consumer – from farmers to the common man to industrialists – all would end up paying way more than they should ideally have been required to. When rates are hiked it also results in an increase in the rate of household items like clothes, food items, salt, oil and various other things that require electricity to be manufactured or processed. This decision of the government will not only affect 6 crore Gujaratis but also end up impacting people who buy products manufactured or processed in Gujarat for the next 25 years. Clearly, Modi’s government is more concerned about ensuring profits for the Adani Group rather than citizens of the state of Gujarat.