What role the Centre played in the US indictment of the Adani case

At the core of the developments leading to the indictment of Gautam Adani and seven others by the US prosecutors – after joint investigations by the Department of Justice (DoJ), SEC (SEBI equivalent) and FBI – is the apparent higher-than-market-price at which the Adani Green and Azure Power won the 2019 “global bid” to supply 12 GW of solar power at home (India) at ₹2.92 per kWh. 

The bid was floated by the central PSU, Solar Energy Corporation of India (SECI), which is under the administrative control of the Ministry of New and Renewable Energy (MNRE). After winning it, the Adani Green described it as “the world’s largest solar award” and the Azure Power as “one of the largest solar projects ever awarded globally”. This award was the basis on which both the firms claimed to deliver “more than $2 billion in profits after tax” in 20 years – as per the US indictment order of November 20, 2024. 

The SECI’s award was for 25 years and came on December 10, 2019. 

Believe it or not, 19 and 23 months after winning the bids, the two firms did the unthinkable – carried out a “suo motu reduction” of the prices. On July 15, 2021, both cut the tariff to ₹2.75 for one part of the projects (called “Package I”) and on November 3, 2021, cut the tariff to ₹2.42 per kWh for another part of the projects (called “Packages II, III and IV”). All four packages (3 GW each) were part of “Package A” of the bid and linked to the manufacturing of solar cells and modules (components). “Package B” was related to the manufacturing of ingots and wafers – which went unsubscribed but later transferred (“green-shoe offer”) to the winners of “Package A” (Adani Green and Azure Power).

These facts are provided in the Central Electricity Regulatory Commission’s order of April 2, 2022 – which approved the “suo motu reduction” of tariff and also set aside all objections to the bidding process (fixing the ceiling price or the maximum at which bids can be submitted, at ₹2.93 and multiple “modifications” in bid conditions along the way). 

The key is to find out how the ceiling was set at ₹2.93 per kWh which led to the winning bids of ₹2.92 – at which Adani Green and Azure Power were awarded the 12 GW projects in December 2019. The suo motu reduction came much later in July and November 2021. 

How SECI’s global bid led to ₹2.92 per unit of solar power

First a look at the market price of solar power at the time.

The “National Electricity Plan” of the Central Electricity Authority (CEA), released on May 31, 2023, provides a graph – the image of which is reproduced below. It shows, the market price progressively declining to ₹2.44 in FY18 and FY19, ₹2.36 in FY20 and ₹1.99 in FY21 (“in December 2020”). The SECI award of ₹2.92 came on December 10, 2019 (FY20) – amidst this progressive decline.

One explanation for the higher price at which the SECI awarded the projects to Adani Green and Azure Power is that it was not a bid for solar power supply alone.

The bid conditions had been changed (at the instance of the MNRE) to add a new first-of-its-kind component – manufacturing of solar cells and modules (“Package A”) and silicon ingots and wafers required for making solar cells (“Package B”).

This addition meant the price (or tariff) would be set higher than the market rate for solar power supply alone – what the CEA graph presents. 

But how much higher? 

There is no clarity in the CERC proceedings.

But the CERC order quotes the sole “objector” Payyaula Keshav (his credentials are not mentioned) claiming that it led to the rise of ceiling price from ₹2.75 to ₹2.93. The SECI didn’t dispute it. Strangely, the CERC added ambiguity to it by stating that the SECI “admits that the price of ₹2.75/kWh did not invoke any interest in the industry”. 

But how did the SECI fix the ceiling price at ₹2.93? 

The CERC order again quotes the SECI stating that it was fixed by the MNRE – “The decision on the final ceiling tariff as ₹2.93/kWh about the present competitive bidding was taken by MNRE, vide Notification dated 9.10.2019”.

Note 1: The CERC doesn’t go into the ceiling price stating that it was “beyond the scope of the present petition”.

Note 2: Adding manufacturing element seemingly restricted participants (Keshav alleged so, which was not disputed by the SECI). Only three firms responded – Navayuga Engineering quoted, strangely, the very ceiling price of ₹2.93 and lost out; Adani Green and Azure Power quoted ₹2.92 and won. 

Note 3: Among multiple “modifications” in the bid conditions by the MNRE (modified on “20.4.2018, 14.8.2019, 9.10.2019 and 22.5.2020”) was the addition of “green-shoe option” (apart from linking to manufacturing). Green-shoe offered an additional capacity of 3,000 MW solar power plants linked with a 1,000 MW component manufacturing plant (“Package B” of the bid) to both the winners (of “Package A”) – Adani Green and Azure Power. This was because none bid for “Package B” (linked to the manufacturing of ingots and wafers; “Package A” linked to the manufacturing of cells and modules and divided into Package I, II, II and IV mentioned earlier). Interestingly, when the “green-shoe offer” was first made, the Adani Green accepted but the Azure Power declined. Nonetheless, the “Bid Evaluation Committee” recommended that it should be offered to both and the Azure Power accepted it thereafter. 

No takers for solar power for 19 months, forces suo motu tariff cuts

As mentioned, both Adani Green and Azure Power cut the tariff post facto and suo motu. 

The first cut came 19 months later when both reduced the tariff from ₹2.92 to ₹2.54 on July 15, 2021 (from December 10, 2019) – for Package I. The second cut came on November 3, 2021, when it was further reduced to ₹2.42 for Package II, III and IV.  

Why did they do so?

No reason or logic for these cuts is offered (by SECI) or sought (by CERC) at the CERC proceedings.

However, the CERC order provides a clue: There was no taker at ₹2.92. (This is also where the bribery allegation by the US prosecutors comes in.)

The CERC order shows, after the first tariff cut to ₹2.54, the SECI signed power supply agreements (PSAs) with Odisha, Chhattisgarh and Tamil Nadu DISCOMs from July 22-September 16, 2021 and PPAs with the Adani Green and Azure Power during October 1-November 11, 2021 (all at ₹2.54). Later, the SECI tied up with Jammu and Kashmir (from the untied capacity under Package-I) at ₹2.54.

After the second tariff cut to ₹2.42, the SECI signed the PSA with Andhra Pradesh on December 1, 2021 (for 7 GW) and PPAs with Adani Green and Azure Power on December 14 and 16, 2021 (at ₹2.42). 

Note 4: All these PSAs and PPAs were signed by the SECI before it received the CERC’s approval for the suo motu tariff cut – which came on April 2, 2022.  

Note 5: The SECI is central to the entire solar power deal. It followed the multiple “modifications” the MNRE directed in fixing the ceiling price and bid conditions (linking to manufacturing and “green-shoe” offer for unbid projects under “Package B”).

Note 6: The states’ responses to the US indictment of Gautam Adani and seven others for alleged bribery is, predictably, their DISCOMs signed the PSAs with the central PSU (SECI), not with the Adani Green or Azure Power. This includes Andhra Pradesh’s then-ruling party, the YSRCP, which faces the heat for the alleged meeting that took place between Gautam Adani and Chief Minister Jaganmohan Reddy in 2021.

Note 7: The SECI has shrugged off the US indictment of Adani and others in the alleged bribery case. Its CMD R P Gupta said: “There is nothing against SECI that SECI has done anything wrong...There is no mention of any wrongdoing or irregularity on the part of SECI.” The MNRE has maintained silence.

Note 8: The SECI’s list of unsold solar power as of October 8, 2024 (“REpower available with SECI for procurement on a long term basis”) shows, that the cheapest available options are: Azure Power’s 300 MW at ₹2.54, and 667 MW at ₹2.42 and Adani Green’s 1,700 MW at ₹2.42. 

Note 9: The Maharashtra State Electricity Distribution Company Ltd (MSEDCL) awarded, on September 15, 2024, a “composite” bid to supply 5,000 MW solar power – at ₹2.7 per kWh – combined with 1,600 MW coal-fired thermal power at the combined “weighted average tariff” of ₹4.08 per unit to the Adani Power. It raised questions about restricting competition (limiting to thermal-cum-solar power players only) and raising market concentration to the detriment of consumers.