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Alleged Bribery Scheme for Solar Power Deals

Syllabus:

GS-2:

Government Policies & Interventions ,Infrastructure

GS-3:

Industrial Policy

Focus:

The indictment of Gautam Adani and associates by the U.S. Department of Justice has revealed an elaborate bribery scheme to secure lucrative solar power contracts in India. The investigation highlights corruption at high levels in the renewable energy sector and the use of bribery to influence government officials.

Overview of the Alleged Scheme

• The U.S. Department of Justice (DoJ) has indicted Gautam Adani and his business associates for their involvement in an alleged bribery scheme to secure solar power contracts.
• Adani Green Energy Ltd. and Azure Power Global Ltd. are accused of bribing Indian government officials to win lucrative solar power contracts, specifically a 12 GW solar power agreement with the Solar Energy Corporation of India (SECI).
• The scheme spanned from December 2019 to March 2024, using various methods including in-person meetings, Excel sheets, and “Bribery Notes” to organise and track the bribe payments.

About  the Solar Energy Corporation of India (SECI):

• Established: 20th September 2011 under the Ministry of New and Renewable Energy (MNRE).
• Objective: Facilitate implementation of National Solar Mission (NSM) and achieve solar energy targets.
• Sector: Sole Central Public Sector Undertaking (CPSU) dedicated to renewable energy.
• Vision: To build a ‘Green India’ and ensure energy security.
• Mission: Lead large-scale solar projects, promote solar energy use, and explore new technologies.
• Company Structure: Initially a Section-25 company (not-for-profit), converted to Section-3 company in 2015.
• Role: Nodal agency for MNRE schemes, involved in turnkey solar projects, and power trading.
• Expansion: Mandate broadened to include all renewable energy domains.

The Motivating Factors and the Scheme’s Unfolding

• Between December 2019 and July 2020, Azure Power and Adani Green Energy’s subsidiary were awarded contracts for 12 GW of solar power supply, but high energy prices prevented SECI from securing buyers for the power.
• Faced with this dilemma, Adani, his nephew Sagar Adani, and other executives from both companies allegedly devised a plan to bribe Indian officials to facilitate the signing of power sale agreements (PSAs) with state electricity companies.
• The plan promised bribes worth ₹2,029 crore ($265 million) to government officials, with ₹1,750 crore earmarked for a key official in Andhra Pradesh.

Bribe Payment Process and the “Bribe Notes”

• The indictment outlines that Sagar Adani tracked the bribery details on his mobile phone using “Bribe Notes.” These notes included information on the total bribe amounts, which government officials would receive them, and the megawatt rate for each state.
• The bribes were structured to secure PSAs with SECI, which would allow Adani and Azure Power to sign power purchase agreements (PPAs) with SECI for solar energy projects.
• Meetings among the co-conspirators discussed the progress and logistics of these bribe payments, including the total bribe amounts owed by Azure Power to Adani Green for the promised bribes.

Financial Arrangements and Methods of Concealing the Bribe Payments

• The co-conspirators used creative financial schemes to conceal the bribe payments. One key strategy was transferring the 2.3 GW PPAs from Azure Power to Adani Green, which would satisfy part of the bribe obligations.
• Azure Power was required to pay Adani Green a share of the bribe amount, approximately ₹638 crore, to secure the 650 MW PPAs. These transactions were hidden under the guise of economic challenges or other legitimate reasons.
• PowerPoint presentations and Excel analyses were used to provide multiple options for fulfilling the bribe payment obligations, ultimately leading to the return of the 2.3 GW PPAs to SECI, which were then allocated to Adani Green.

Final Steps and Termination of the PPAs

• As part of the final steps of the scheme, Azure Power’s board approved the withdrawal from the 2.3 GW PPAs, with the official explanation being “deteriorating economics.” This move was timed with SECI’s reallocation of the PPAs to Adani Green’s subsidiary.
• The scheme culminated in March 2024 when SECI sent letters to terminate the 2.3 GW PPAs and relocate them to Adani Green’s subsidiary, solidifying the success of the bribery operation.
• Throughout this process, Sagar Adani and other key figures continued to direct and monitor the implementation of the scheme, including tracking the final stages of the PPAs’ reallocation.

Challenges in Addressing the Bribery Scheme:

• Lack of Transparency in Procurement Processes
  • The opaque nature of procurement contracts and tendering processes in the energy sector makes it difficult to identify and prevent bribery schemes.
• Weak Enforcement Mechanisms
  • Inadequate enforcement of anti-corruption laws and lack of rigorous monitoring at both local and national levels allow fraudulent practices to persist.
• Limited Accountability for Corporate Executives
  • High-ranking executives often evade accountability due to their influence and the lack of direct legal action against them in many cases.
• Complexity of Tracking Illicit Financial Transactions
  • The use of multiple layers of financial transactions, including offshore accounts and bribe payments disguised as legitimate business dealings, complicates investigations.
• Political and Bureaucratic Resistance
  • Resistance from political and bureaucratic elites may hinder efforts to uncover and punish corrupt activities, especially when powerful stakeholders are involved.

Way Forward:

• Strengthen Regulatory Frameworks
  • Improve transparency in government procurement processes by enforcing stronger oversight, audits, and due diligence checks for energy contracts.
• Improve Whistleblower Protection
  • Establish robust mechanisms to protect whistleblowers and encourage reporting of corrupt practices.
• Enforce Strict Accountability for Executives
  • Hold corporate executives accountable by ensuring stricter penalties for involvement in bribery and corporate malfeasance.
• Implement Advanced Financial Monitoring Tools
  • Use modern technologies like blockchain and AI to monitor and detect suspicious financial transactions in energy contracts.
• Collaboration Between International Bodies
  • Promote international cooperation between governments, regulatory bodies, and organisations like the U.S. Department of Justice to tackle cross-border bribery schemes.

Conclusion:

The bribery scheme surrounding Adani Green Energy and Azure Power underscores significant weaknesses in procurement processes and corporate accountability within India’s renewable energy sector. Strengthening regulations, improving transparency, and enhancing enforcement mechanisms are critical to ensuring fair business practices and curbing corruption in government-linked projects.

Source:The Hindu

Mains Practice Question:

Discuss the challenges and measures needed to ensure transparency and accountability in government procurement processes, particularly in the energy sector. How can international cooperation contribute to combating cross-border bribery schemes in such industries?