Saturday, February 15, 2014
How Adani got contracts for supplying power despite being the most expensive
The deal struck between the Adani group and the Modi government for supply of power to the state smacks of blatant favouritism and corruption. While the people ofGujarat are being duped, the Adani group is reaping massive profits. The Gujarat government challenged court judgements, inserted tailor made clauses and muscled out all other private players who were in the fray to sell power to Gujarat, all to ensure that Adani got an exorbitant price for the power it produces.
Chairman, Adani Group
It all began in 2006 when the Gujarat Urja Vikas Nigam Limited (GUVNL) invited tenders for the purchase of 2000MW electricity. Three companies – Adani Enterprises Limited, Jindal Power Limited and Power Trading Corporation (PTC) India Limited filed tenders on 26 June 2006. Adani offered a price of Rs 3.7038 per unit, Jindal Rs 3.48 per unit and PTC offered a price of Rs 3.25 per unit. Adani and Jindal had bid to supply 500MW and 150 MW power respectively, while PTC had bid to supply 440 MW (190 MW from Chitarpur Coal and Power Limited and 250 MW from JSW Energy Limited at Ratnagiri). PTC is a power trading company which purchases and sells power.
Also Read: Adani-Modi nexus to cost 23,625 cr
But the Tender Evaluation Committee of the GUVNL found these rates unreasonably high and hence it re-invited financial bids from the bidders who had already submitted their RFQ (request for qualification) documents. On 9 November 2006 three companies – Adani, Jindal and PTC – filed fresh tenders offering rates of Rs 3.2939, Rs 3.24 and Rs 3.2497 respectively. The Evaluation Committee recommended that Jindal’s bid should be allotted tender because it was offering the lowest price. When PTC and Adani came to know about the Jindal offer, they too offered to supply power at the same rate as Jindal. As a result the corporation sent letters of intent to all the three companies to supply power at the same rate, which was Rs 3.24 per unit.
The day PTC received the letter of intent it wrote back proposing to increase its total power supply from 440 to 630 MW. But strangely the GUVNL rejected its proposal contending that it could not be considered since the letter was received after the letter of intent had been sent. The rejection of PTC’s revised offer was shocking to say the least.
It shows that the Gujarat government had already made up its mind to make a closed-door deal with the Adani group. The state needed at least 2000MW power whereas the total contract capacity of all successful bidders was just 1590MW. In such a scenario the rejection of PTC’s renewed proposal made no commerical or financial sense. On the contrary it exposes a case of favouritism and corruption. Gujarat was grappling with severe power shortage. To make up for the widening gap in demand and supply, the governmnet was buying merchant power (the business terminology for power that is purchased on temporary basis as distinguished from power purchased under long term agreements) from Adani Enterprises at an exorbitant rate of Rs 5.31 to Rs 5.45 per unit. Documents available with Gulail show that between October 2006 to August 2007 alone, Gujarat government had paid Rs 322 crores to Adani Enterprises for short-term power at a rate of Rs 5.45 per unit.
On the one hand the Modi government was purchasing expensive short-term power from Adani and on other it resolutely refused to accept additional 190 MW power from PTC which was cheaper by Rs 2.21 per unit. Why?
The story of crony capitalism doesn’t stop at this. At this stage Adani and Modi governmnet held hush-hush back door mettings and decided to award Adani the contract for 1000 MW at Rs 2.89 per unit. A similar opportunity to lower their bid offers was not offered to PTC and Jindal. Instead they were unilateraly issued termination letters invalidating the earlier issued letters of intent. The ground for termination was cited as lower tariff of Rs 2.89 offered by Adani.
The subsequent judicial process revealed that the contract with Adani was signed on 8.1.2007 while the LOIs of Jindal and PTC were cancelled on 12.1.2006. It is a classic case of politician-corporate nexus under which diefferent rules were set for different companies. It shows that the Modi regime had already made up its mind to award contract only to Adani while shutting its doors to Adani’s competitors.
Even though PTC and Jidnal were willing to supply long term power they were denied the opportunity to renegotiate even as Adani entered into closed door negotiations to lower its offer price after the letter of intent had been sent.
Shantanu from Prayas Energy Group, a Pune based NGO dedicated to democratizing energy governance in India, stressed, “There needs to be transparency in the tender process. There should be no tampering with the documents related to bidding and after the details have been set there should be no changes implemented in the original conditions that were laid out.”
Jindal Power filed a writ petition in the Gujarat High court against this one-sided decision of the GUVNL, following which the HC on 24 January 2007 put a stay on the tender process, which essentially meant that GUVNL could not go ahead with the deal with Adani. In response Adani Power Limited filed a Civil Application asking for the stay to be vacated. On 6 February 2007, the Advocate General, the top law officer of the Gujarat government, appeared for GUVNL and made a written submission before the court that in case the final outcome of the case went in Jindal Power’s favour, the GUVNL would sign the agreement with Jindal on same tems as it had offered Adani. On this, the court vacated the stay.
Within a few hours of the court order, the GUVNL signed the contract with Adani group.
There was a sinister design behind this mad rush to sign the contract with Adani, as subsequent court proceedings revealed.
Four days before signing the Rs 2.89 PPA, on 2.2.2007, the GUVNL entered into another agreement with Adani for supply of 1000MW power at the rate of Rs 2.35 per unit. This fact was hidden from both public and other power producers.
The question is why did the Modi regime sign a contract at Rs 2.89 when only four days earlier it had signed a similar contract with Adani at Rs 2.35 per unit. A difference of even one paisa per unit balloons into an extra burden of hundreds of crores every year. After all it’s the people of Gujarat who are going to foot the bill for expensive electricity. (Subsequently, Adani reneged on the Rs 2.35 contract on various dubious grounds, only honouring the more expensive Rs 2.89 contract)
Coming back to the fight put up by PTC and jindal against favouristism shown towards Adani, the PTC too filed a separate case in the HC on February 22, 2007 challenging the cancellation of its Letter of Intent. The GUVNL again submitted in the court that in case PTC went on to win the case it too would be accommodated in the bid and allowed to supply 440MW power at the same terms as Adani.
Subsequently, Jindal Power opted out of the race and its application was disposed of.
But PTC continued its fight. Finally, the HC allowed PTC to enter into an agreement with GUVNL to sign a PPA to supply 440MW power for 25 years at the rate of Rs 2.89 per unit, the same as was signed with Adani on 6 February 2007. But the GUVNL was so intent on muscling out PTC and allowing only Adani to reap the benefits that it filed a Special Leave Petition in the SC challenging the directions of the HC. The SC threw out the application.
But still the Modi regime refused to sign the contract with PTC. The GUVNL now rejected PTC’s bid on the pretext that the company had now offered to give all of 440 MW from just one source that is Chitrapur Power Ltd.
by Rajeev KumarOctober 07, 2013