MP’s solar tariff puts TN’s Adani deal under scanner

The Madhya Pradesh power deal shows that Tamil Nadu will be paying a lot more for solar power than it should be.

CHENNAI – The Tamil Nadu government recently signed a 25-year deal with the Adani group to buy power at Rs 7.01 per unit from the company’s proposed 648MW solar plant to be set up in Ramanathapuram district. But with the same company offering to sell solar power at Rs 6.04 per unit to Madhya Pradesh, the agreement with the Tamil Nadu power utility, Tangedco, has raised some questions.

While solar power costs have plummeted globally with the advent of new technologies, Tangedco, with an accumulated loss of about Rs 54,000 crore, decided to go in for a long-term agreement with Adani to buy power at a relatively higher tariff. That too at a time when the state government is under fire for purchase of high-cost power from private producers, with the opposition parties alleging a scam.

On Friday, when Madhya Pradesh opened bids for a 300MW solar project, the lowest bidder turned out to be Mauritius-based Sky Power South East Asia Holding Ltd, which offered to sell power at Rs 5.05 per unit for 25 years. Adani Power quoted Rs 6.04, and its bid was rejected. The other bidders included Reliance Power, Welspun and Sun Edison.

The Madhya Pradesh power deal shows that Tamil Nadu will be paying a lot more for solar power than it should be. The fact that Tamil Nadu signs agreements with each and every solar power company and Madhya Pradesh chose the bidding route selecting the power supplier may have made all the difference. Even in Gujarat, the leader in solar power generation in the country, the tariff is now less than Rs 7 per unit, a sharp drop from Rs 9 or more per unit that the state was paying till a couple of years back.

In September 2014, the Tamil Nadu Electricity Regulatory Commission (TNERC) decided adopt the preferential route for setting up solar power projects in the state, totally doing away with the bidding process. It also fixed a price of Rs 7.01/unit for solar power.

Defending Tamil Nadu’s price, a TNERC official said: “The price in Madhya Pradesh must be without taking into account the land price. The government must be giving the land and therefore the price may be lower compared to Tamil Nadu, where the company is purchasing land at the market price.” He said the tariff in Tamil Nadu is based on the guidelines issued by the Central Electricity Regulatory Commission (CERC).

However, power experts say Tamil Nadu is a loser in the solar deal with Adani. “Going by the bids, Madhya Pradesh will be paying the lowest price for solar power in the country. One fails to understand why Tangedco agreed to pay Rs 7.01 per unit to Adani when the company could offer power at Rs 6.04 per to MP. If solar power is available for five hours a day, then considering Adani’s bid of Rs 6.04, Tangedco stands to lose approximately Rs 7.76 crore per day,” a solar power expert told TOI. But if Madhya Pradesh’s tariff is taken into account, the loss would be more than Rs 12 crore per day, he said.

Rubbishing the argument that the MP deal may not have included the land cost, he said: “Even assuming that land is available at Rs 5 lakh per acre, the tariff per unit will not be more than Rs 6 per unit and the price fixed by Tamil Nadu is too high.” Soon after the MoU with the Adani group was signed, leaders of opposition parties in TN had criticized the government for agreeing to pay a high tariff despite the availability of cheaper power from other sources. The Adani plant is set to come up at Kamudhi in Ramanthapuram district. – Times of India

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