102% rise in average electricity cost bought from Adani Power between 2021-22, reveals Gujarat govt

The average cost of electricity purchased by the Gujarat government from Adani Power soared by 102 per cent between 2021 and 2022, reported Indian Express.

In response to a query from Aam Aadmi Party MLA Hemant Ahir, State Energy Minister Kanu Desai told the House that the average cost of power purchased from Adani Power increased by 102 per cent, from Rs 3.58 per unit to Rs 7.24 per unit in 2022.

The price of one unit of Adani Power electricity jumped from Rs 2.83 in January 2021 to Rs 8.83 in December 2022.

Despite the hike in prices, the state government purchased 7.5 per cent more power from Adani Power in 2022 than in 2021. In 2022, the Gujarat government bought 6,007 million units of energy, up from 5,587 million units the previous year.

During these two years (2021-2022), the government paid Rs 8,160 crore to Adani Power which includes fixed charges and per unit cost of power.

This happened even after Adani Power's bids in 2007 enabled the company to sell power for 25 years at prices ranging from Rs 2.89 per unit to Rs 2.35 per unit.

According to the Gujarat government, the Adani Power project was reliant on imported coal from Indonesia, and after 2011, the power producer was unable to generate power at full capacity due to an unanticipated spike in coal prices.

Taking note of this, The state government created a committee on December 1, 2018, and then issued a resolution partially changing the committee's recommendations and approving a rise in electricity rates. This resulted in a supplementary agreement on December 5, 2018 between Adani Power and the government. Furthermore, post the intervention of the Government of India, it was agreed to acquire power at fixed energy charges of Rs 4.5 per unit and capacity charges in accordance with the agreement with the company.

On how the Gujarat government will recover the rising cost of electricity purchased from private producers like Adani Power, KK Bajaj, an expert told Indian Express, “The Government will simply hike the Fuel and Power Purchase Price Adjustment (FPPPA) charges. Though the Gujarat government claims that it has not raised electricity tariff for the past several years, the authorities have been silently hiking the FPPPA charge, which is part of the residential consumer’s bi-monthly electricity bill.”

The state government hiked FPPPA costs at least eight times between 2021 and 2022. The most recent increase occurred in January 2023, after the state Assembly elections. The state government currently charges an FPPPA of Rs 2.85 per unit of energy consumed. In April 2021, the fuel fee was Rs 1.8 per unit.

Adani Group stocks have been under pressure since January 24 after a Hindenburg report. In a bid to win back investors’ confidence, Adani Group is holding worldwide roadshows. The company will hold meetings with fixed-income investors from March 7 to 15 in Dubai, London, and the US, according to news reports.

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