Haryana government Archives

Adani Power | Representative image | Photo courtesy: Special arrangement Over the past few years, Adani Power Mundra Limited (APML) and the state government of Haryana have been embroiled in a dispute over a power purchase agreement. After the dispute reached the courts, it seemed that it would be resolved. However, that has not happened. During the scorching heatwave that gripped Haryana in the summer of 2022, a power company of the Adani Group was accused of deviating from its contractual obligations by delivering a lower quantity of electricity to the state's power distribution companies (discoms). It was further alleged that electricity meant for Haryana had been illegally rerouted to Gujarat. Earlier, starting from December 2020, Adani Power Mundra Limited (APML) had allegedly been defaulting on the power purchase agreement (PPA) it had signed with the state government of Haryana. The PPA, signed in 2008, requires Adani Power to supply 1,424 MW of power from its Mundra power project in Gujarat to Haryana at a "levelised" tariff of ₹2.94 per unit (or kilowatt-hour) for a period of 25 years. These allegations have been made in a series of letters sent to Union Minister of Power R.K. Singh and top officials in the Ministry of Power and the Central Electricity Authority (CEA) by the All India Power Engineers Federation (AIPEF), an organisation representing engineers employed in central and state government-owned electricity generation, transmission, and distribution utilities across the country. The allegations have not been denied. Read More: IMEC: The Politics Behind the New Geopolitical Corridor That’s Shaking Up Global Alliances In early March, it was announced that Adani Power had signed supplementary power purchase agreements with two discoms in Haryana. These contractual agreements entailed the supply of 1,096 MW of electricity generated using domestic coal at a rate of ₹3.20 per unit. The new agreement, meant to supersede the old one from 2008, increased the electricity tariff from ₹2.94 per unit by 9%. Further, the quantum of power to be supplied was lowered, as will be detailed later in this article. Despite the supplementary PPA, the Mundra power plant has continued to deliver only a fraction of its contracted power capacity to Haryana until August 2023. The terms of the PPA are thus being violated for the fourth consecutive year. Supreme Court Judgement In an article authored by us earlier, we pointed out that Adani Power had justified increasing power tariffs to consumers because the price of coal imported from Indonesia had risen significantly due to new export policies in that country. The Supreme Court, however, rejected this argument. In its judgement delivered on April 11, 2017, a two-judge panel of the apex court comprising Justices R.F. Nariman and Pinaki Chandra Ghose stated that the principle of "frustration" could not be applied to these cases because the fundamental basis of the contracts had not changed. Nowhere in the contracts did it specify that coal had to come only from Indonesia at a certain price. In fact, looking at the contracts, it was evident that the price paid for coal was the responsibility of the owner of the power plant, the court ruled. The Supreme Court of India explained that the inclusion of a fuel supply agreement in the contract was simply to confirm that the necessary raw material for the plant (that is, coal) was available and in order. The court emphasised that an unexpected increase in coal prices outside India could not be an excuse for power companies to not fulfil their contractual obligations. When these companies submitted their bids, they were aware of the risks they were taking, the court ruled. The court did consider Adani’s argument about the unforeseen increase in Indonesian coal prices. The contracts were signed between 2006 and 2008, and the price surge occurred between 2010 and 2011. The court acknowledged that such a price hike was beyond their control. The force majeure clause in the contract allowed for a compensatory tariff if their performance was hindered due to unforeseen events. Read More: Neglected Public Healthcare Centres in Gautam Buddh Nagar In Uttar Pradesh Exposed A force majeure clause (French for "superior force") is a provision in a contract that relieves the parties from fulfilling their contractual obligations when certain circumstances beyond their control arise, such as natural calamities or "acts of God," making the performance of the parties inadvisable, commercially impracticable, illegal, or impossible. The Supreme Court stated that a contract could not be considered nullified just because certain circumstances had changed. The court emphasised that it did not have the authority to excuse a party from fulfilling its contractual obligation simply because performance had become difficult due to unforeseen changes. In other words, the substance of the Supreme Court judgement was that Adani Power could no longer use the rise in prices of coal imported from Indonesia to justify charging higher power tariffs to consumers in Haryana. Interestingly, around this time, two different power companies in the Adani Group were facing controversies related to the import of Indonesian coal. In 2014, the Directorate of Revenue Intelligence (DRI) issued a notice to Adani Power Maharashtra Limited (APML) and Adani Power Rajasthan Limited (APRL) for allegedly inflating the value of imported coal. It was claimed that invoices for Indonesian coal were being routed through intermediaries in places like Singapore, Hong Kong, Dubai, and the British Virgin Islands to artificially increase the price. The DRI argued that APRL was passing on this artificially inflated coal price to power consumers in Rajasthan. However, the DRI's investigation was hindered by various court cases. In July 2022, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) dismissed the case. The DRI appealed this decision to the Supreme Court, but on March 28, 2023, its appeal was dismissed. A Supplementary PPA In April 2022, discussions commenced between Adani Power's Managing Director and Chief Executive Officer Anil Sardana, Rajesh Adani, Managing Director, and Haryana's Chief Minister Manohar Lal Khattar on the company's appeal to revise the power purchase agreement. Khattar reportedly concurred with the representatives of Adani Power that supplementary agreements were necessary to address Haryana's electricity shortages until the volatility in the prices of imported coal subsided. Read More: Delhi Ridge: Over 800 Hectares Of Forest Land Under Encroachment Despite NGT Orders As per the modified agreement, Haryana would receive 84% of the initially stipulated 1,424 MW at the original tariff rate of ₹2.94 per unit. This power generation would be sourced from domestic coal. Meanwhile, the state would forgo the remaining 16% that was supposed to be produced by Adani Power using imported coal. Subsequently, on March 1, 2023, Adani Power, in a formal communication to the Bombay Stock Exchange (BSE), conveyed its intention to supply the 1,096 MW of power to the state government of Haryana using only domestic coal. Additionally, for any power consumption exceeding the capacity utilized sourced from domestic coal, the energy charge would be determined based on the price of imported coal, linked to the escalation index of the Central Electricity Regulatory Commission (CERC), the communication to the BSE added. Given below is the content of the letter written by Adani Power Limited to the Bombay Stock Exchange. This is to inform that Adani Power Limited (“the Company”) has signed SPPAs with Dakshin Haryana Bijli Vitran Nigam Limited and Uttar Haryana Bijli Vitran Nigam Limited (collectively “Haryana DISCOMs”) in respect of its two existing Power Purchase Agreements of net contracted capacity of 712 MW each (1566 MW in aggregate at generation end), which is being supplied from the Phase-IV 1980 MW (3x660 MW) capacity of the 4620 MW power plant at Mundra, Gujarat. Under the terms of the SPPAs, the net capacity contracted with Haryana DISCOMs has been revised to 600 MW each, or 1200 MW in aggregate (1320 MW in aggregate at generation end), as delivered, considering availability of domestic coal linkage. Further, the Haryana DISCOMs will pay quoted energy charges for power generated from domestic coal under long-term Fuel Supply Agreement, which shall continue to be proportionate to previous Generation end capacity of 1566 MW, while for power consumed beyond the domestic coal materialisation and availability, energy charge will be based on imported coal price linked to CERC escalation index. This development will thus give Haryana access to full capacity of 2x660 MW Units on exclusive basis and will allow the Company to schedule power supply from the third Unit of Phase-IV to other procurers, which will be pursued through bid opportunities in next few months. Kindly take the same on record. Thanking you. Yours faithfully, For Adani Power Limited This supplementary tariff arrangement apparently disregards the April 2017 verdict of the Supreme Court that dismissed Adani Power’s appeal for compensatory tariffs, since the court affirmed that there were no valid grounds for increasing power tariffs due to the higher prices of coal imported from Indonesia. During the legal proceedings, even the counsel for the Haryana government had refrained from accepting the plea of allowing tariff increases due to higher prices of imported coal. While negotiations regarding the signing of a supplementary PPA with Adani Power were going on, the Haryana Power Purchase Centre (HPPC) put forward a claim of ₹2,436 crore for the absence of power transfers to the state and the expenditure incurred on procuring electricity for distribution by the state government’s discoms from alternative sources. In response, Adani Power remained resolute in its stance and insisted on the withdrawal of all pending cases, appeals, and assertions associated with the preceding contract. During the heatwaves in Haryana last summer, power cuts resulting from this dispute led to people buying electricity at much higher tariffs. Several instances were reported of people using diesel generators to consume power at high prices. However, in the current context of the upcoming Lok Sabha elections in 2024, the Khattar government seems to have opted for ensuring continuous power supply to consumers in the state, even if discoms charge higher prices to consumers. The situation is, however, not so simple. Haryana continues to experience shortages of power because of a gap between demand and supply after the announcement of the supplementary PPA. As a result, consumers have to pay more for electricity. Continuation of Violation A letter dated August 2 sent to the Union Ministry of Power by the All India Power Engineers Federation (AIPEF) has alleged that the Mundra power plant of Adani Power continues to violate both the 2008 PPA as well as the supplementary PPA. It should be noted that the supplementary PPA between the Haryana government and Adani Power is not in the public domain. The letter, which has been shared with the authors of this report, highlights the fact that the power generating units in Mundra are functioning at levels that are significantly lower than their installed capacities, and certain units (such as Unit 9) have been intermittently shut down. The original PPA signed in 2008, which is supposed to be valid for 25 years, entails the supply of electricity from Units 7, 8, and 9 in the Mundra project. The “ultra-mega” power project of Adani Power, located in the Kachchh district of Gujarat, has a total installed capacity of 4,620 MW divided among nine units with varying capacities; it mainly uses coal imported from Indonesia. It has agreements with discoms owned by the governments of Gujarat and Haryana. Adani Port Mundra Limited claims to be the largest coal importer in India and boasts a world-class port located near the Mundra power project. Over the last two years, the AIPEF has sent several representations to Power Minister R.K. Singh. A recent letter dated August 16, 2023, points out that the overall quantum of power transmitted from Mundra to Haryana through High Voltage Direct Current (HVDC) lines remains inadequate; on certain days, barely a third or only around 500 MW of electricity, out of the original contracted quantum of 1,424 MW, had been supplied. These HVDC lines, set up under the 2008 PPA and meant for transmitting power from Gujarat to Haryana, have been transmitting power in the reverse direction—from Haryana to Gujarat—without any formal agreement in place. The AIPEF has pointed out that such reverse transfers are intended to take place only when there is surplus electricity in a particular state, over and above its consumption demand. The excess electricity is then transmitted to other states, and in such situations, the recipient states are obliged to financially compensate the discoms in the “exporting” states. However, such a situation does not prevail in Haryana, which is short of power. Until August 23, the federation has calculated that around 1,000 MW of power has been transferred. As mentioned, these facts and figures have not been challenged. On June 12, 2023, a directive was issued by the Ministry of Power (MoP) under Section 11 of the Electricity Act of 2003, stipulating that imported coal-based thermal power stations should operate at full capacity load until September 30. A subsequent directive issued on August 23 extended this deadline to October 31. One of the thermal power stations affected by these MoP directives is Adani Power Mundra Limited (APML). According to the information provided by the AIPEF, as of August 24, Units 1, 2, 3, and 4 (each with an installed capacity of 330 MW, or a total of 1,320 MW) at the Mundra project were shut down due to a shortage of coal. Units 5, 6, and 8 (each with an installed capacity of 660 MW, or a total of 1,980 MW) were operating at reduced loads, while Unit 7 had not been operational since August 11. Units 8 and 9 were also operating at a reduced load of 1,015 MW (or the equivalent of 24.22 million units). Padamjit Singh, the Patiala, Punjab-based patron of the AIPEF, told the writers of this article over the phone, “The response from various authorities to applications seeking data or information has consistently been stonewalled. Information is also being withheld by the state governments of Haryana and Gujarat, as well as at RLDCs (Regional Load Dispatch Centres), SLDC (State Load Dispatch Centres), the Union Ministry of Power, and the discoms in Haryana.” Questionnaires were emailed to Haryana Chief Minister Khattar, Haryana Power Minister Ranjit Singh, Chief Secretary of Haryana Sanjeev Kaushal, Adani Group Chairman Gautam Adani, and a spokesperson of the Adani Group. We asked them whether bills/invoices have been raised by the discoms in Haryana to the discoms in Gujarat and on Adani Group companies for payment of electricity worth Rs 2,436 crore (including Rs 1,144 crore from Adani Power Mundra Limited) as compensation because the discoms had to purchase electricity from third parties due to the non-supply of power by companies in the Adani Group. We also asked them for the date when the supplementary Power Purchase Agreement was signed and a copy of the agreement. This article will be updated if and when responses are received to our emails. The authors are independent journalists. To ACCESS and SUPPORT our exclusive stories and impactful public interest journalism, subscribe to our YouTube channel. Click on THE PROBE'S LOGO below to subscribe.

Tag: Haryana government

Adani Power: Will They Cease Violating the Power Purchase Agreement with Haryana Discoms?

Home

INVESTIGATIONS. SOLUTIONS. IMPACT. DEVELOPMENT.

Tag: Haryana government

Adani Power: Will They Cease Violating the Power Purchase Agreement with Haryana Discoms?

Home

INVESTIGATIONS. SOLUTIONS. IMPACT. DEVELOPMENT.

Want to more?