Is Adani set to supply electricity in Kerala as power crisis looms in state?

Kerala had cancelled the state power board’s KSEB’s long-term power agreements to purchase power from three other private companies for 25 years citing procedural lapses

Representative image showing electricity transformers (photo: Getty Images)
Representative image showing electricity transformers (photo: Getty Images)

Ashlin Mathew

The Adani Power and DB Power have expressed interest in the tenders which have been floated by the Kerala State Electricity Board to resolve the power crisis in the state.

The Board had to float tenders because in May the Kerala State Electricity Regulatory Commission had cancelled KSEB’s long-term power agreements to purchase power from three private companies for 25 years citing procedural lapses.

In the bids that were opened on Monday, Adani Power agreed to supply 303 MW at Rs 6.88 per unit and DB Power stated it would supply 100MW at Rs 6.88 per unit during the reverse e-bidding for the 500MW power purchase agreement (PPA) with KSEB. Adani and DB Power had originally quoted Rs 6.90 and Rs 6.97 per unit respectively. However, following negotiations, they revised it to Rs 6.88 per unit.

Though the board had floated tender for 500MW, the companies have offered to provide only 403 MW. The board will open another tender for purchase of 200 MW on a short-term contract on Tuesday and the one for the purchase of 500 MW on Wednesday.

The KSEB had floated tenders for the five-year medium-term contracts in lieu of a number of Design, Build, Finance, Own and Operate (DBFOO) contracts. However, the Kerala State Electricity Regulatory Commission had declined to approve these. As there was a delay in approving these contracts, the Commission had permitted the KSEB to continue procuring power until December 31 from the DBFOO contracts.

Due to the cancellation of DBFOO contracts, Kerala has to purchase power at Rs 6.88, instead of Rs 4.26. The cost difference of Rs 2.62 for 433 MW round the clock translates to additional expenditure of Rs 2.723 crore/day, which translates to Rs 994 crores per annum. This additional financial burden is likely to be passed on to the already over-charged Kerala consumers.

Kerala is staring at the twin spectres of a power crisis and drought. At the root of the problem lies a deficit southwest monsoon, which has reportedly brought 44 per cent reduced rainfall, which in turn has resulted in record low levels of water in dams across the state.

The power crisis emerged because the Kerala State Electricity Regulatory Commission (KSERC) had cancelled, in May, KSEB's long-term power purchase agreements that sought to purchase power from three private companies for 25 years. KSERC cited procedural lapses to cancel the agreements.

KSEB is currently forced to purchase power from RTM (Real Time Market) at Rs 10 per unit round the clock, as all through India there is scarcity of electricity and not enough power available around to trade in the power exchanges. Rs 10 is the ceiling set by the union government.

In 2016, KSEB had entered into an agreement with four private companies to purchase power at Rs 4.29 per unit. As per the agreement, the state could purchase 465 MW of power from these companies over a period of 25 years, including 115 MW from Jhabua Power Ltd, 150 MW from Jindal Power Ltd, 100 MW from Jhabua Power Ltd and 100 MW from Jindal India Thermal Power Ltd. As per the long-term agreement, power would have been available within 24 hours at the same rate from 2016 for the next 25 years. These companies did not participate in the recent tender.

The LDF government has maintained that the deals were illegal and said it would initiate a vigilance probe against Aryadan Mohammad, the power minister in the late Oommen Chandy's cabinet.

However, in the face of the looming power shortage, Chief Secretary V Venu is set to meet KSEB chief Rajan Khobragade to look at the possibility of reviving the cancelled agreements. The meeting was called at the directive of Chief Minister Pinarayi Vijayan.

It must be remembered that Adani Power had attempted to take over the thermal power assets of DB Power Limited (DBPL) from the Dainik Bhaskar Group in October 2022 for Rs 7,017 crore, but had to call it off in February 2023 after missing the deadline to complete the transaction.

The development had come after the Adani Group had to cancel its follow-on public offering (FPO) of its flagship company Adani enterprises after a report by US activist short seller Hindenburg Research alleged the company of financial misconduct.

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Published: 05 Sep 2023, 1:55 PM