By Rajiv Shah
Pointing out that it is hard to fathom why state governments in India go back on their word and tearing up contracts awarded by them, “Mint”, in an opinion piece, has given the example of how Gujarat has “reneged” one of its own deals. “In one fell swoop”, the daily says, “Gujarat’s power procurement agency cancelled tenders for 700 MW of solar power generation given to a clutch of energy producers, citing lower tariff bids in a subsequent auction.”
“The companies left staring at Letters of Award (LoAs) that might no longer be worth the ink they bear include Vena Energy, Tata Power, ReNew Power and O2 Power”, the unsigned opinion piece says, pointing out, “Last August, these firms had won contracts to put up facilities in Gujarat’s Dholera Solar Park through an auction process that yielded ₹2.78 per unit as the lowest bid for the supply of electric energy to a state-run power grid.”It adds, “In October, Gujarat Urja Vikas Nigam Ltd gave out duly-signed LoAs. The final power purchase pacts were to be inked in January. But that was not to be. In December, an auction for another solar project threw up ₹1.99 per unit as the lowest bid. The gap between the two was presumably too much for the state to live with, and, in a travesty of due process, it nullified the Dholera tenders.”
While some of the aggrieved firms are set to challenge the state’s decision at the Appellate Tribunal for Electricity, the opinion piece reminds of a blog for the “Times of India” I wrote on August 20, 2013 about misgovernance under Modi’s Gujarat. It is titled “Narendra Modi’s Solar Eclipse”:
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In was January-end 2008. I was planning a story on spurt of investment in Kutch district of Gujarat after the killer quake of January 26, 2001. I called up RJ Shah, then chief principal industrial advisor (a strange designation, I thought, principal and chief together!), and he immediately responded, saying, he had all the details and I should reach his office in the industries commissionerate in Udyog Bhawan, Gandhinagar. A diligent government official who always had all the industry figures on his tips – something which is a rarity in the babudom today – Shah scanned through his papers and was simply awestruck: “This is absolutely marvelous. Kutch has as of today Rs 78,688 crore worth of investment under implementation, which comes to 39 per cent of Gujarat.”Then, Shah decided to have a closer look at the investment proposals, and one of them happened to be a solar project. “Wait, wait, wait”, he looked through his traditional spectacles. “This is really very strange. This solar project, by one Suryanarayan Power Generation Ltd, alone is for Rs 26,000 crore. I have no idea about how this project got into the list of Industrial Entrepreneurial Memorandums, submitted to the Government of India (GoI)”, Shah declared, adding, “Even the address looks strange – Saraspur, Ahmedabad, with no other contact details”. I decided to make further investigations and approached Gujarat Energy Development Agency – the Gujarat government’s arm for alternative sources of energy – which was headed by Vangmin Buch, another amicable official, who had deeper knowledge of things cultural than anything solar.
Buch told me, rather frankly, that the project proponents had approached him, and had even made a presentation. “Thereafter, we tried approaching them at the address they had given us, of Saraspur, Ahmedabad, but they never replied. There is no phone number.” Yet, he suggested, someone from the Gujarat government ensured that the project proponents filed an IEM with the GoI – perhaps with the intention to jack up figures of investment in Gujarat, especially for solar projects. An insider confided it to me that this was done at the instance of state industries minister Saurabh Patel, who even insisted Gujarat government sign a memorandum of understanding (MoU) with the this company. “Patel’s idea was spiked by then principal secretary, energy, S Jagadeesan”, I was told.
The story on Suryanarayan Power Generation Ltd was published in the Times of India, saying the state government was failing to find its address, though it had ensured that an IEM was filed. Suddenly, the project proponents showed up, they reached my office in Ahmedabad to issue a rejoinder. The personal assistant of my editor of the Times of India, Ahmedabad, phoned me up in Gandhinagar to say that the CEO of the company was sitting on his personal computer to type a rejoinder and wanted to see me. The CEO talked to me on the Times of India phone, said he wanted to see me. We decided to meet in my Gandhinagar office next day, at Akhbar Bhawan, exactly at 11.00 am.
I reached office on time, tried to locate a swanky car but couldn’t find one. So I thought that the CEO had still not come. On entering office, I found three persons were waiting to see me. One of them introduced himself as the CEO of the company, even gave me his business card. I promptly asked him, “I didn’t see any car. How did you come?” And the answer was, “By state transport bus to Gandhinagar bus stand, and then by rickshaw.” Very interesting! I asked him, how he would bring in Rs 26,000 crore, as even the address was not clear, and this is what this CEO replied: “Oh! Money is no problem. Our project can go right up to Rs 90,000 crore. We only need land in Kutch, and that’s it.”
But who will fund the solar project? Banks? He further replied, “It is a secret, but we can tell you. We have had talks with officials of the Dalai Lama’s organization, and they have promised us all the help, including financial. They don’t have any problem of funds.” The meeting ended amicably here, following which the CEO handing me over a project report. Then he asked me, “How do we go to the industrial commissioner’s office? Can we meet anyone there?” I asked my peon to go and find a rickshaw for the CEO and two others who accompanied him. I was later told, on the minister’s insistence, the CEO even made a “high level presentation” before the Gujarat government!
Suryanarayan Power Generation Ltd is not the only example of the type of investors the Gujarat government wanted to rope in, in order to showcase how the state was all set to become the “solar capital” of the country. With the Gujarat government offering a lucrative Rs 15 per unit for the first 12 years of investment to anyone setting up a solar plant, a senior GEDA official told me in 2012, “proposals for 20,000 MW of solar power had been received and were pending to be cleared, and these included (imagine!) few neorich foodgrains merchants, too, operating in the Agricultural Produce Marketing Committees (APMCs) of Gujarat.”
Out of the 20,000 MW, Gujarat government “screened” and “signed up” power purchase agreements (PPAs) for 960 MW, three-fourths of India, with tens of solar units, taking advantage of the offer of such a high subsidy. Till the middle of last year, 650 MW plants had already come up, producing 3 million units per day of power. “It would mean the state would have to shell out at on an average Rs 1,600 crore per year for next 12 years only to pay for the high price at which the solar power was being sold”, a senior official, who calculated the whole amount, conceded to me. Objections began being raised by senior officials of the Gujarat Urja Vikas Nigam Ltd, the outfit which was born out of former Gujarat Electricity Board, they had “no money”, that they would go “bankrupt”.
Realizing that the solar hype would cost the coffers huge sums, state principal secretary, energy, D Jagatheesa Pandian, decided to approach the Gujarat Energy Regulatory Commission (GERC), early this year, asking the government to “allow” a revision of PPAs, slashing down the payment drastically. The outgoing GERC chairman, PK Misra, principal secretary to the chief minister during the 2002 riots and known to be close to Gujarat CM Narendra Modi, perhaps for the first time in several years refused to oblige the Modi government (though for wrong reasons), surprising most babus in Sachivalaya. While the Gujarat government cited “unwanted and windfall gains to solar developers”, the GERC dismissed the state plea as “not maintainable”.
There is reason to wonder: What was the great urgency to go in for solar PPAs at a time when experts had all along been warning that the cost of setting up solar power was coming down, and the Gujarat government should wait instead of rushing to set up solar power plants like this? The mad solar rush reached a point when a solar park was set up in North Gujarat. The hype continued, till Pandian decided to act, finding problems to the coffers. Clearly, there cannot be any other explanation to this than Modi’s and his aides’ effort to showcase Gujarat as the sole place in India where solar power investors could come and invest. Playing politics at the cost of state coffers – this seems to have been the sole aim of the whole exercise.
Already, officials admit, the capital cost of solar power per MW has come down by half. More recently, many of the plants were established in India on purchase of power equipment at a sharply reduced cost, for Rs 7 crore per MW, down from Rs 16.50 crore per unit in the middle of the last decade. Now, with the GERC order in hand, at Rs 15 per unit, Gujarat entrepreneurs would recover the capital cost of power from government subsidy in no time. Thereafter, they would be happily living on government subsidy, especially when the actual cost of producing solar power is just 15 paise per unit. Last year, at a reverse bidding in Delhi, the capital price of solar power was pegged at Rs 7.75 per unit. “Yet, we will have to continue are offering Rs 15, thanks to our misadventure”, a senior official told me.
Meanwhile, there is no end to Modi’s solar misadventure. After being the first in India (again!) to set up 1 MW of solar power panels, 750 metres long, atop a Narmada branch canal, at the unprecedented cost of Rs 17.50 crore, the Gujarat government recently declared it would replicate it for another 10 MW, again on canal top – at the cost of Rs 12 crore per MW. And, this at a time when the cost of setting up a solar power has already come down to nearly half as much! And what would the Gujarat government do with solar power, at a time when it is already a power surplus state? “We think that the Government of India should buy up all of surplus solar power”, to quote one official.
One can wait – hopefully, Modi would do it in case he becomes Prime Minister!
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