India Coal
Adani at Centre of Power and Heat Wave Crisis in North India
May 12, 2022
Parts of the sub-continent are suffering an unprecedented and deadly heat wave. Image NASA Earth Observatory

Citizens in several parts of northern India have been suffering power outages during a record heat wave. Worsening the crisis, Adani Power cut off electricity supply to the state of Haryana (which adjoins the country’s capital) amid a dispute with the local government over payment of tariffs.

North India is reeling under a heat wave with summer starting weeks earlier than expected. Worsening the situation are long hours of power outages. While several factors are responsible for the unprecedented electricity shortage, in the middle of the crisis is Adani Power, one of the country’s biggest producers of power. Adani Power Ltd is part of the conglomerate headed by Gautam Adani, the richest man in India and one of the ten most wealthy people on Earth.

The Economic Times started an article published on 4 May 2022 titled ‘India’s heatwaves are testing the limits of human survival’ with the following opening paragraph.

‘New Delhi feels like it is on fire. The heat comes off the road in blistering waves, and the water that flows from the cold tap is too hot to touch. Daytime temperatures have hit 44 degrees Celsius (111 Fahrenheit) and often do not fall below 30 at night. A giant landfill on the outskirts of the capital spontaneously combusted a week ago and the 17-storey-high dump that contains millions of tons of garbage continues to smolder, worsening the city’s already dangerously polluted air.’

Festivities were subdued in many parts of Gurugram in the North Indian state of Haryana on Tuesday, even though it was the occasion of Eid-ul-Fitre, the biggest festival of the Muslim community, as well as Akshaya Tritiya, an annual spring festival celebrated by Hindus. Power outages, which have rocked the state for over a fortnight, have thrown the lives of residents into disarray. Here is what three residents told Adani Watch:

Ramesh Vashisth, a 77-year-old senior citizen said: ‘The long hours of power outages have affected kids and senior citizens like me the most. The heat wave is intense this year and school children are finding it difficult to concentrate on their studies in the absence of fans, coolers and air-conditioners. Their examinations are under way. We have been using diesel-run portable electricity generator sets whenever we can. But diesel is expensive. And the pollution caused by burning diesel affects our health.’

Deepika Naithani, an IT (Information Technology) professional, added: ‘The coal crisis, the overloaded and ancient infrastructure, and the lack of planning all contribute to this crisis. Whether it is upgrading or maintaining the infrastructure or buying power from the Adani Group, it’s about time the Haryana government took concrete steps to address this annual crisis.’

Beetashok Chatterjee, a former merchant navy captain and an author said: ‘The situation is deplorable. With the early onset of summer and temperatures rising to a maximum of 45 degrees Celsius, have come frequent outages and long hours of power cuts that are making the lives of ordinary citizens miserable. It is about time the government of Haryana sorts out its problems with electricity suppliers and relieves us of this ordeal.’

In late April and early May, many parts of India, especially the northern part of the country, have been in the grip of a deadly heatwave with the mercury touching record highs in several cities and towns. Many state governments, including the government of Haryana, have published rosters of scheduled power outages, owing to a shortage in electricity generation. In many places, the electricity cuts have exceeded what was specified in the rosters.

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Haryana, which has been hit particularly badly by the power crisis, cited a dispute over electricity tariffs with a ‘particular private power producer’ as one of the reasons behind the supply crunch. While the state government did not name Adani Power, the BJP-led government has itself come under considerable flak for failing to resolve this dispute.

Adani Power Ltd has been at the centre of disputes between state power agencies and energy providers during the height of India's heat wave. Image Geoff Law

Even as Haryana scrambled to put together power-purchase agreements with various entities, a stalemate continued between the state government, headed by Chief Minister Manohar Lal Khattar, and Adani Power Limited. The private company has stopped supply of electricity to the state from its Mundra Thermal Power Plant in Gujarat (one of the biggest in India). Adani Power, the biggest private power producer in the country and one of the major suppliers to Haryana, refused to supply electricity unless it is paid a higher rate of tariff than what had been agreed upon with the state’s power distribution companies (discoms).

According to media reports, Adani Power has been reluctant to supply electricity at the contracted tariff. It has cited an increase in production costs owing to a hike in the price of imported coal. Following in the footsteps of Adani Power, another private firm, Tata Power, has also reneged on its commitment to supply electricity to Haryana at tariffs contracted in its PPA with the state government.

Origins of Haryana’s Power Crisis

According to a petition filed in early-April by the state government with the Haryana Electricity Regulatory Commission (HERC), the power crisis in the state was aggravated because Adani Power stopped supplying electricity nearly six months ago. Adani Power, the largest private power supplier to Haryana, with a contracted capacity of 1424 MW, was followed by Tata group-owned Coastal Gujarat Power Limited (CGPL), which has a contract to supply 380 MW of electricity to the state. As per their respective contracts with the Haryana government, electricity from Adani Power is sold to the state at a tariff of Rs 2.94 per unit or kilowatt hour (kwh). The corresponding tariff for CGPL has been fixed at Rs 2.26 per unit.

Despite the vulnerability of people on the Indian sub-continent to the effects of climate change, the Adani Group is speeding ahead with new coal mines and new coal power stations.

Following a meeting on April 23 between Haryana Chief Minister Khattar, Adani Power’s director Rajesh Adani and chief executive officer and managing director Anil Sardana, it was decided that a supplementary PPA was required to resolve the power crisis in the state. In accordance with the new agreement, Haryana will be supplied only 70 per cent of its 1424 MW of contracted electricity from Adani Power at the rate of Rs 2.94 per unit (a price that had been agreed upon in the original PPA). This amount of electricity (1050 MW) will be derived from domestic coal only. In order to avoid escalation of costs in purchase of power, Haryana will have to forego 30% of the contracted supply which, as per the original PPA, is to be generated by Adani Power from imported coal. The supplementary PPA will be in force temporarily until soaring prices of imported coal settle at normal levels. But it is not clear yet if Adani Power will be allowed to trade electricity generated from imported coal at power exchanges (as had been allowed in the past by the Modi government) during the period that the supplementary PPA is in force and whether profits, if any, generated by Adani Power by trading electricity at the exchanges will be shared with Haryana government. 

The Haryana Power Purchase Centre (HPPC), the state-government enterprise which purchases electricity for distribution across the state, has justified procurement of expensive thermal power from privately-owned thermal plants, citing a central-government scheme. This justification has been put forth because of the acute power shortage due to the non-availability of electricity from Adani Power, following litigation over the latter’s alleged violation of the terms of the PPA, and also because state-owned power plants are not operating at full capacity due to shortages in supplies of coal as well as technical snags.

Another massive Adani coal-power plant takes shape - despite the obvious impacts on the Earth's climate and vulnerable citizens in India. Photo Geoff Law

Criticism from the Government Auditor and Opposition Parties

The Comptroller and Auditor General of India, which audits the finances of all government-owned entities, had pulled up the Haryana government even before the power shortage worsened in mid-April. It criticised the state government for failing to enforce the PPAs that the state had entered into with various private power-generating entities. In a report presented in Parliament in March 2022, the CAG noted:

‘Haryana Power Purchase Centre incurred extra expenditure of Rs 209.33 crore [about US $27 million] in purchasing costly power from private producers and preparing incorrect merit order which put an extra burden on consumers of the State.’

The report further stated: ‘HPPC had extended favour to these private power producers by purchasing their power at Rs 4.90 to Rs 5.00 per unit against the variable cost of State’s own generating stations (Rs 3.25 to Rs 3.88 per unit).’

The CAG held that the justification put forth by HPPC to purchase power from outside entities as untenable for two reasons: (a) the terms and conditions of the PPA were legally binding upon privately-owned electricity-producing units, and (b) a single day’s shortage of coal at plants was taken by the state government as the basis for entering into short-term power purchase agreements at higher tariffs.

The government watchdog also noted that issues with Adani Power over tariffs had already been resolved when HPPC had given an in-principal nod in October 2018 to purchase costlier power from other entities under the central government scheme.

The power crisis in Haryana has hit its agricultural sector very hard and also affected manufacturing units located in the industrial townships of Ambala, Yamunanagar, Kundli, Faridabad, Gurugram and Manesar.

The state’s main opposition party, Congress, ridiculed the Khattar government’s decision to purchase costlier power through short-term contracts. Party spokesperson Randeep Singh Surjewala, in a press conference in the third week of April, questioned the Khattar government as to why it had not been getting 1424 MW of electricity from Adani Power’s thermal plant in Mundra (located in Gujarat). He also asked what action had been taken by the government against the company for not supplying contracted power since late 2021.

‘Why is the M L Khattar government not buying power at the risk and cost of private power generators, including Adani Power?’ asked Surjewala at the press conference. He claimed that Haryana used to be a power-surplus state until the BJP was elected to power in the state in 2014 for the first time.

Taking a cue from the CAG report, Surjewala pointed out that the state government had purchased electricity from two private firms based in Madhya Pradesh and Chhattisgarh, respectively, after failing to enforce the terms and conditions of the PPA upon Adani Power.

Unconvincing claims on coal supply

The power crisis comes amid tall claims by the Modi government that the country has reduced its import-dependency in the coal sector because of its ‘Shakti’ policy, a centrally sponsored scheme ostensibly aimed at allocating and utilising coal resources in a transparent fashion. On 8 March, the Union Ministry of Coal issued a press release claiming that India has achieved a significant reduction in coal imports, despite the surge in power demand, because of the increase in domestic production of coal.

‘Imports of all grades of Non-Coking Coal have come down to 117.507 Million Ton (MT) during April-December 2021 from 147.85 MT during the corresponding months of FY 20, leading to a decline of about 20.52% … The import of Non-Coking coal, primarily used in power sector, has decreased by 59.20% from 52.49 MT to 21.41 MT up to Dec 2021 in comparison to the same period of FY 20,’ claimed the ministry in the release.

What should be remembered is that the reduction happened because 2020-21 was a lean year due to the prolonged lockdown imposed by the Union government on account of the Covid-19 pandemic that devastated the Indian economy.

A month after issuing the press release, the Union government asked all state-run and privately-owned power-generating companies to increase imports of coal for blending with domestically produced coal. The upper blending limit has risen from 4% to 10%. The Union Ministry of Power asked all thermal power plants with domestic coal linkage to use 10% imported coal to blend with domestic coal. The Adani Group is the largest coal importer in the country. According to the 2020-21 annual report of Adani Enterprises Limited, ‘the Company’s IRM (integrated resources management) business accounts for a quarter of all the coal imported into India.’

Government meeting with Adani Power and Tata Power

Notwithstanding the claims of the Coal Ministry, the Union Ministry of Power held a meeting with Adani Power and Tata Power on 28 March attempting to resolve issues on how to reduce pressure on demand for domestically-produced coal. Around 17 GW of plants reliant on imported coal were reportedly lying idle following the steep increase in the international prices of coal in the wake of the Russia-Ukraine war. The price of imported coal has more than trebled from US$60 per tonne to $203 per tonne.

Tata Power imports coal from Indonesia, where it holds a 30% stake in a particular mining company to operate its plant in Gujarat. During the meeting, it was reported that Tata Power had agreed to share proportional profits from mining with distribution companies from its 30% share. This profit-sharing arrangement is restricted to the quantity of coal used by the company in its Mundra plant.

What about Adani Power which also owns coal mines in Indonesia? Sample the following facts.

Adani Power has petitioned the Central Energy Regulatory Commission asking for tariff revisions on several occasions. In an order on one of the petitions filed in 2013, a member of the commission, S Jayaraman, stated in his dissenting note: ‘it came up during the hearing that Adani Enterprises (the flagship company of the Adani Group) held 74% of shares in the Indonesian coal company through which the coal was being imported. The increase in the price of coal directly benefits the Indonesian company, whose benefits are passed on to Adani Enterprises in the shape of return for the investment. Thus, the Adani Group as a whole may be the ultimate beneficiary of the Indonesian regulations.’

In December 2018, the Gujarat government passed an order allowing Adani Power (Mundra) Limited to charge higher tariffs for electricity it generates, despite a Supreme Court ruling against the move in 2017.

Returning to the meeting of the power ministry officials with representatives of Adani Power and Tata Power in April, it was reportedly put forth by certain officials during the meeting that Gujarat, which was also witnessing an increase in electricity demand, had already sorted out its dispute with Adani Power. Gujarat Urja Vikas Nigam Limited (GUVNL) had agreed to an out-of-court settlement between the two entities in January 2022. In October 2021, GUVNL decided to purchase electricity from Adani Power on a short-term basis at a rate much higher than what had been agreed upon in the PPA. Tata Power had also resumed electricity supply from its Mundra plant during the same month after the state governments of Punjab and Gujarat agreed to pay higher tariffs than what was fixed in the PPAs with the two states.

Government enabling profiteering by power generation companies amid power crisis?

During India’s power crisis, instead of ensuring that the private power-generating companies adhere to the terms of the PPAs, the Modi government has been allowing them to trade electricity in the power exchanges. Short-term rates offered by power-distribution companies for emergency purchases at power exchanges are generally much higher than the tariffs in long-term contracts in PPAs. In September 2021, the Modi government allowed Adani Power to sell electricity generated from its Mundra thermal power plant at power exchanges. Another beneficiary of this statutory order, which had been issued for one month only, was Tata Power, which was also allowed to sell power from its plant in Mundra.

On 30 April 2022, with stocks of domestic coal depleting, the Modi government cancelled 42 passenger trains, claiming that it was done to make way for coal carriages destined for power plants. But will the central government in New Delhi be able to produce adequate amounts of domestic coal to tide people over during the crisis? The government-owned Coal India Limited (CIL), which is often described as the largest coal producer in the world, has been systematically weakened over the years in order to facilitate private players, including the Adani Group, that have entered coal mining following the opening up of the sector for commercial trading of the mineral.

Anil Swarup, India’s former coal secretary, wrote in Bloomberg Quint in May 2020: ‘Coal India was sitting on Rs 50,000-crore cash reserve (about US $6.5 billion) in 2016, but it appears that most of it has been taken away by the government to handle its fiscal deficit.’

He stated that such depletion of funds from CIL had affected its ability to expand its coal-extraction operations.

‘Ironically, the depletion of Coal India’s resources is happening on account of unwarranted dividends and investments in projects – fertiliser being one of them – that are not related to the core activities of this company,’ stated Swarup.

Adani Power’s disputes with several Indian states

A similar stalemate has played out in the western state of Maharashtra too, where Adani Power has reduced supply of electricity for unknown reasons, allegedly breaching the provisions of its PPA contract with the state government.

Nitin Raut, the energy minister of Maharashtra, said that a show-cause notice had been issued to the Adani Group for violating the terms of the PPA. Another power supplier to Maharashtra, the Sajjan Jindal-led JSW Group, also slashed power supply, citing a breakdown of equipment in the plant that would take at least nine months to repair. Speaking to a television news channel earlier this week, Raut confirmed that the state government had already entered into a short-term power purchase agreement with Tata Power at a higher rate after the private firm had reduced its contracted supply of 760 megawatts (MW) by at least 130 MW.

Adani Power has been at loggerheads with the southern Indian state of Karnataka as well, over the former’s demand for higher power tariffs. The company’s Udupi coal-power plant is not operational due to disagreements with the state government over imported coal prices. As per the minutes of the meeting of the Union Power Minister with officials of various states that were held on 8 and 13 April, a discom in Karnataka was not ready to enter into a short-term power purchase agreement with Adani Power to buy electricity at a costlier rate.

But the Union Power Ministry asked the Karnataka government to follow the formula used by GUVNL to calculate the escalation price. Further, Reuters reported on 3 April that the Andhra Pradesh government in southern India had cancelled a couple of tenders because the prices bid by the Adani Group to supply imported coal were excessively high.

With disputes between private power producers and state governments unlikely to be resolved expeditiously, and with international coal prices likely to remain high, India’s long hot summer will certainly not end quickly, and its citizens will continue to swelter.