February 27, 2022

Who’s Lying?

B Pradeep

THE recent wrangle between the prime minister, chief minister of Telangana and union power minister exposes one of the false narratives the central government has been building, even while putting spotlight on how crony capitalism is appropriating yet another human endeavour to save mother earth, for its ugly profiteering.

Prime Minister Narendra Modi’s claim that his government was supplying power at the rate of Rs 1.10 per unit to states was squarely challenged by chief minister of Telangana K Chandrasekhar Rao and he called it a lie. He further alleged that the central government is forcing states to procure renewable power from private generating companies who are funding the ruling party at the centre resulting in backing down of generating stations within the state. He also stated that the state is not going to install energy metres for agriculture pump sets even though the state is likely to lose Rs 25,000 crores due to non-relaxation of FRBM limits. The union power minister joined the controversy stating that it is the chief minister who is lying as the states can invite their own bids to procure renewable power.


At the very outset, it is evident that the claim of the prime minister is far from fact. As per the latest report of Power Finance Corporation, an entity under the central government, the average power purchase cost of power distribution companies (DISCOMs) in India is Rs 4.73 per unit. Among the states it varies between Rs 2.71 (Sikkim) to 5.38 (Manipur) per unit, depending on the geographical location, source mix etc. The figures for major states are Rs 5.25 for Telangana, Rs 5.22 for Maharashtra, Rs 5.19 for Uttar Pradesh, Rs 5.13 for Karnataka etc.

If we take a look at the rate of power supplied by generating companies owned by the central government, the scenario is no different. The average rate of power sold by central government owned corporations to Delhi are Rs 4.99, Rs 2.51 and Rs 3.29 on an average in respect of NTPC, NHPC and NPCIL stations respectively as recorded by the Delhi Electricity Regulatory Commission in its latest tariff order. The scenario is similar for other states also. Around 90 per cent of power is procured by the DISCOMs through similar long term contracts. The balance is mostly procured through day ahead markets operated by power exchanges. The market is split into 15 minutes blocks (96 blocks for a day) and bidding to discover rate for each block is carried out separately. This market is very volatile by design depending on demand-supply mismatches. Last week the rates varied between Rs 1.99 to Rs 20.00 and the weekly average rate was Rs 4.43. The short term market to take care of seasonal variations operated through the DEEP (Discovery of Efficient Electricity Price) portal managed by Power Finance Corporation is repeatedly resulting in prices well above Rs 5 per unit and often goes as high as Rs 15 per unit depending on the period of supply. The coming summer months are expected to see much higher rates as the power demand soars in the country.

Thus, there is no basis for the miracle figure thrown up by the prime minister from nowhere and what the chief minister stated about the claim is obviously an accurate observation.


As part of its Intended Nationally Determined Contributions, India has declared the target of 175 GW and 500 GW renewable power capacity by 2022 and 2030 respectively. To achieve these targets, the central government has notified a mechanism fastening ‘renewable energy procurement obligation’ or ‘RPO’ on DISCOMs. Meanwhile the estimates of renewable energy potential in the country establishe that the resources are unevenly distributed among states, with Rajasthan, Gujarat, Karnataka, Tamil Nadu, Madhya Pradesh, Andhra Pradesh etc being endowed with abundant solar and wind energy potential and vast tracts of suitable land. Many other states fall way behind due to geographical peculiarities. Keeping this in view the RPO targets of the states should ideally be aligned to the availability of natural resources in each state. However, the central government is unilaterally fixing uniform RPO targets for all states, compelling states with inadequate resources to procure power from projects located in renewable rich states. Further, the central government has provided ‘must run’ status to renewable projects. Due to this mechanism, many states are forced to back down their own generation to accommodate renewable power from renewable rich states during lean demand seasons/periods. The state governments have repeatedly approached the central government to rectify this anomaly and allow the state electricity regulatory commissions to fix the RPO taking into consideration the resources within the state and the national trajectory for renewable energy addition. The central government is turning a deaf ear to these repeated demands of the states.

After putting in place this flawed framework, the central government is carrying out periodical bids for setting up of solar and wind projects through the Solar Energy Corporation of India (SECI) purportedly on behalf of state DISCOMs (without taking prior concurrence from DISCOMs). The SECI has so far conducted 11 rounds of wind bids, 13 rounds of solar bids and 4 rounds of solar-wind hybrid bids since 2018. Interestingly, while more than 50 firms regularly participate in these bids and are allocated projects, 4 firms have grabbed almost 50 per cent of the awarded capacity of around 30,000 MW. Among these four, the firms related to Adani group take a lion’s share of around 45 per cent among them. Whether this skewed allotment has something to do with the allegation of the chief minister needs to be brought out through a detailed enquiry by an independent authority.

Further, things are becoming murkier with a significant portion of the allotted capacity failing to find buyers as DISCOMs are reluctant to sign power purchase agreements with the selected firms as they already have adequate arrangements to meet their power demand even though many find it difficult to meet the RPO prescribed by the central government. The central government through its various offices is often hand twisting the state government officials for inking the contracts. It is noted that many provisions in the agreement format are detrimental to the interests of the DISCOMs and even state regulatory commissions are seeking modifications in such provisions. But, on the pretext that the agreement formats are part of the bid documents these one sided formats are thrust upon the DISCOMs. This is per se illegal as any contract shall only be concluded with the free consent of the parties.

Once this scenario is understood, one can easily find that the statement of the union power minister is hollow, as the states with limited internal natural resources inviting their own bids is likely to become a fruitless exercise. Thus the states are being unnecessarily burdened with projects awarded by the central government by unreasonably imposing uniform RPO across the country.

Alongside these developments, the central government has announced 38 solar parks for development of another 25,000 MW of which 21,000 MW is located in five renewable energy rich states. The parks are developed with fiscal and other incentives from central and state governments. Among these, Adani has cornered two solar parks. Recently, Rajasthan High Court has cancelled allotment of land to solar parks including the one being developed by Adani. The intervention came in view of irregularities in land allotment and it is reported that solar projects close to 10,000 MW capacity are now under scanner in view of large scale irregularities.

It appears that ‘animal spirits’ have started working as big capitalists have already tasted blood. The recent flow of big announcements on investments and acquisitions in the renewable energy sector including hydrogen by big corporate houses like Adani and Ambani are indicative of this. It reminds one of the earlier coal scam which resulted in the creation of huge coal generation and power transmission infrastructure which remains severely underutilised, but is profusely bleeding the banking and power distribution sectors now.


The third part of the controversy relates to metering of agriculture pump sets. Earlier the central government, in continuation to the recommendations of the fifteenth finance commission, has put in place a performance based additional borrowing space above the regular borrowing limit. The additional space amounts to 0.5 per cent of GSDP. A major portion of the performance matrix involves measures like prepaid metering of agriculture pump sets, stoppage of free electricity supply by introducing DBT and reduction in cross subsidy. Those states who are unwilling to carry out the framework are given the ‘option’ to privatise their DISCOMs for availing the additional fiscal space!

It is astounding to note that such unilateral conditions are thrust upon the state governments even in the midst of the historic farmers’ movement that is still reverberating across the country. In this context it appears that the option of the state governments cannot be limited to the one exercised by Telangana of opting out of fiscal space of Rs 25,000 crores. The development and social security needs of the states are of a bigger concern and cannot be surrendered before ill conceived conditionalities of the central government.


B Pradeep is the vice president of the Electricity Employees’ Federation of India