The ban on Adani may prove costly for Andhra government, this is the reason

Adani Group: The dispute between the Andhra Pradesh government and the Adani Group over the 7,000 MW solar project has raised a new challenge. Recently, news came that the government is planning to cancel the contract of this project. This news came at a time when the Adani Group has been accused of bribery in the US. However, canceling this contract will not be easy for the state government, as it can have deep implications related to the economic and energy crisis.

Challenges of canceling the project

If the Andhra Pradesh government cancels this project, it will have to face one of two options. The first option is to pay a fine of Rs 2,100 crore, and the second is to pay an electricity bill of Rs 1.61 lakh crore. Both options can put a heavy burden on the financial situation of the state.

Review and note prepared by Chief Minister Naidu

State Chief Minister Chandrababu Naidu himself is reviewing this controversial project. He has prepared a detailed note for the cabinet meeting, which mentions the possible options and their financial consequences. Naidu's review of the project also becomes important as it involves allegations of alleged bribery of Rs 1,750 crore against Leader of Opposition YS Jagan Mohan Reddy and Adani Green Energy Limited (AGEL).

Option to reconsider tariff

The state government is also exploring the option of reconsidering the tariff (electricity rate) on the project. AGEL has proposed a tariff of Rs 2.49 per kilowatt hour (kWh). However, documents of the state electricity department show that this tariff is lower than the actual cost.

GST and customs duty: These could push the tariff to Rs 3.069 per kWh.

Transmission losses: This loss incurred by Central Transmission Utility of India Limited will add 80 paise per kWh, taking the tariff to Rs 3.869 per kWh.

At this rate, the total power bill of the project will be Rs 1.61 lakh crore over 25 years.

Other option: Terminating PSA

The government has another option: terminating the power purchase agreement (PSA) with Solar Energy Corporation of India (SECI). However, this option is also not cheap. If the government cancels the PSA, it will have to pay a fine of Rs 2,100 crore.

Allegations and increasing pressure against Adani Group

The allegations of bribery against the Adani Group in the US have further complicated this decision of the Andhra Pradesh government. Opposition parties have accused the government of lack of transparency with the Adani Group. Amidst these allegations, deciding on the project has become a major political and economic challenge for Chief Minister Naidu.

Way forward

It is not easy for the Andhra Pradesh government to decide whether to continue with the project or cancel it.

If the project continues: The state will have to bear the burden of expensive tariffs.

If the project is canceled: Heavy fines or energy crisis will have to be faced.

Conclusion

The Andhra Pradesh government is currently in a complex situation, where every option can affect the financial and political stability of the state. It will be important to see what direction Chief Minister Naidu's next move will take this dispute. Also, this decision can have a long-term impact on Andhra Pradesh's energy policies and investment climate.