The Jammu and Kashmir government is counting on Prime Minister Narendra Modi's visit on Saturday for an announcement of a much-awaited financial package of Rs 1 lakh crore for the state.

Earlier this year, the coalition government of the People's Democratic Party and Bharatiya Janata Party submitted proposals seeking assistance from the Centre under the Prime Minister’s Reconstruction & Rehabilitation Plan 2015. The largest share of funds has been sought for the state's power department, which sent proposals to the Union Ministry of Power in July asking for Rs 43,853 crore.

Even if a part of this request is met, it would be a financial windfall for the department at a time when it finds itself in the midst of several controversies.

The most recent relates to the transfer of 255 assistant executive engineers on a single day. The transfer orders were issued on September 16 by Deputy Chief Minister and BJP leader Nirmal Kumar Singh, who holds the power portfolio. Singh noted in the department's correspondence file: "Premature transfer, if any, and, departure from policy, if any, are also approved in the public interest."

The mass transfers were opposed by Sandeep Nayak, the power secretary at the time, who, among other things, pointed out that the department had not submitted a proposal and the minister was not the competent authority to issue the orders. The law department concurred with Nayak and held that the transfers appeared to be a "random exercise". How could the transfers be "treated or termed as public interest" when the department was not even sure whether there were "any premature transfers/deviation of transfer policy", it asked. Before the law department could make its opinion known, Nayak was transferred out of the power department on October 19.

It is another controversy over a private solar project, however, that raises more significant questions over the department's ability to utilise the central assistance in a transparent manner.

The project

In 2013, a private company registered in Chennai, Then Energy Private Limited, proposed to set up a 100 MW solar photovoltaic project in Kathua district at the investment of Rs 950 crore. The proposal was approved by the previous National Conference-led government. But it chose not to sign a power purchase agreement with the company. Such an agreement would make it binding for the state to buy power from the project for several years at a fixed price, which was higher for solar projects than for thermal and hydel plants.

The company had the option to sell power to other buyers. But it kept the project on hold.

In April this year, the project received a boost when a month after it was sworn in, the PDP-BJP government revived discussion on the project and initiated steps to sign a power purchase agreement with the company.

Not everyone in the government, however, thinks this is a good move.

Government correspondence examined by Scroll.in shows both the power department and the finance department have raised concerns over signing a power purchase agreement without inviting competitive bids. The power department has pointed out that other states have held auctions for solar projects and obtained tariffs that are lower than the fixed tariff prevalent in Jammu and Kashmir.

Meanwhile, soon after the revival of prospects of a power purchase agreement, changes have taken place in the project's ownership. On July 21, the initial proponent, Then Energy Private Limited, entered into a joint venture with Venayak Energy Private Limited, a company registered in Jammu just the previous day.

Under the agreement, Then Energy's ownership in the Kathua solar project has fallen to 10%. The new company, Venayak Energy, now owns 90% of the project.

Scroll.in has examined company documents filed by both Then Energy and Venayak Energy. There is no evidence that either of the companies, or their directors, have any previous experience in the power sector.

The minister did not respond to emails and messages. But in statements made to the local media soon after the controversy over the solar project erupted, he chose to shift blame to the National Conference government, pointing out that it had approved the project.

That still does not explain the PDP-BJP government's decision to review the project, or the minister's insistence that the power department sign a power purchase agreement with the company, which will effectively lock the state into high tariffs at a time when the price of solar power is falling.

Interestingly, regardless of the government in power, a detailed look at the company's statutory filings show a close correlation between its ownership changes and fluctuations in the government's stance on the project.

From Chennai to Jammu

Then Energy Private Limited was incorporated with a seed capital of Rs 1 lakh on June 4, 2009, in Chennai by Venkatraman Sivakumar. Company filings show that Venkatraman Sivakumar and his son, Sivakumar Anjan, were the initial shareholders.

For the next three years, the ownership of the company remained unchanged. Its annual returns showed zero income, expenditure and profit, which means the company did no business.

In March 2013, the Science and Technology Department under the previous National Conference-led government approved the company's proposal to set up a solar photovoltaic project of 100 MW in Kathua district of Jammu region. It asked the power department to initiate the process of signing a power purchase agreement with the company.

Between March and October 2013, 9,500 shares, which amounted to 95% stake in the company, were transferred to Varun Sachar, a resident of Delhi.

In October, however, the state government wrote to the company, suggesting that it could execute an "open access" agreement that would allow it to sell power to any buyer in India. This meant the government was no longer interested in signing a power purchase agreement with the company that would bind it to buying power from the project. The loss of an assured buyer and fixed price possibly reduced the project's profitability. Almost immediately, in November, Sachar sold back his 9,500 shares to the original proponents.

In January 2014, Masoud Hussain Wani, a resident of Budgam in Kashmir, joined the company as director. Four months later, two Delhi-based companies – JP Fincap Private Limited and Oaktree Infraventures Private Limited – picked up 4,525 shares each in the company. Gaganpreet Kaur, a director in JP Fincap, and Lalit Kumar, a director in Oaktree, were appointed directors in Then Energy but they went on to resign in September 2014. It is unclear if the companies too divested their stake in Then Energy since the statutory filings for the period after September 2014 are yet to be made.

While it isn't possible to determine whether there has been any change in the shareholding pattern of the company over the last year, forms submitted to the Registrar of Companies show the entry of Anirudh Chandel, a resident of Jammu, as director in Then Energy in March 2015.

A month after Chandel joined the company, on April 21, the Kathua solar project came up for discussion in a meeting of the PDP-BJP government. According to the minutes of the meeting, seen by Scroll.in, on the recommendation of the science and technology minister, the chief minister asked the power department to "facilitate signing of PPA" with the company.

As the discussion continued, the finance minister pointed out that the relative cost of solar power was higher than hydro power and the signing of power purchase agreement would be a "challenge" for the power department. The science and technology secretary said that the state "has to necessarily buy solar power to the extent of 1.5% of its energy demand under the Renewable Power Obligations".

The meeting ended with directions that the state formulate a power purchase policy that would factor in power purchase agreements to be signed by the power department to meet Renewable Power Obligations targets. While Jammu and Kashmir has power purchase regulations, it does not have a comprehensive power purchase policy. A committee was set up under the power secretary to formulate the policy.

The entry of Venayak

Meanwhile, the ownership of the Kathua project underwent a radical change.

On July 20, Chandel went on to register a company called Venayak Energy Private Limited with two other residents of Jammu, Amarjeet Singh and Adil Mustafa Khan. The company had an initial share capital of Rs 1 lakh. Chandel held half its stake, while Singh held 30% and Khan the remaining 20%.

The next day, Then Energy Private Limited entered into a joint venture with Venayak Energy Private Limited.

Chandel, who was the largest shareholder in Venayak Energy, signed the agreement on behalf of Then Energy.

The agreement states the two parties have entered into a joint venture "exclusively for the purposes of execution of solar hybrid project" and "to enter into Power Purchase Agreement with the J&K government".

The agreement brought down the share of Then Energy in the Kathua project to 10%, leaving 90% of the stake with Venayak Energy, the newly formed company.

Why did Then Energy give up 90% stake in the project just when chances of an agreement with the state brightened?

Scroll.in sent questions to the directors of both Then Energy and Venayak Energy asking them to explain the transaction. Only one of them, Adil Mustafa Khan, a director in Venayak Energy, responded.

He said the project required 300 acres of land. Since the original promoters of the project were based in Chennai, they could not buy the required land as Jammu and Kashmir limits ownership of land to residents of the state. For this reason, the original promoters needed local partners in the project, he claimed.

Why such a large share in the project for the local partners? Apart from land, he said Venayak Energy was also "bringing investors to the project". When asked who the investors in the project were, he said he could not reveal their names since that was a "business secret".

As for previous experience, Khan claimed Chandel had "taken training in solar power" and had worked with the original promoters in the status of an "employee" since the inception of the project.

When asked about the possibility of competitive auctions, Khan said it was a "good idea". He claimed the company would get even higher tariffs in the auctions since it would not face much competition. "Outside companies cannot buy land in the state and there are no other local players," he said.

Examining the claims

Khan's statements are economical with the truth.

Take the claim that original promoters need local partners to source land. While it is true that outsiders cannot buy land in the state, under the state policy, any company setting up industry can get land on lease for 90 years.

Two, the annual returns filed by Then Energy over the years do not mention any salary payments to Chandel, or for that matter, any other employee.
Three, Khan's claims on competitive auctions notwithstanding, the company's correspondence with the government shows it had been pushing hard for a power purchase agreement.


On July 24, three days after it was formed, Venayak Energy wrote to the chief minister saying the power purchase agreement was yet to be finalised and requested him to "look into the matter personally". The chief minister forwarded the company's letter to the power secretary on July 31 and asked him to "take steps for addressing the issues highlighted by the developer".


On August 8, a letter marked "Most Urgent" went from the office of the deputy chief minister, Nirmal Singh, to the power secretary, Sandeep Nayak. The letter said Singh had taken a serious view of the fact that no action had been taken by the power department towards signing the agreement for the Kathua project despite the lapse of three months since the April meeting. It asked the power secretary to "take immediate necessary steps regarding signing the PPA".

PPA versus Auctions

But the power department maintained that signing the power purchase agreement was not "advisable". On August 17, the chief engineer of the commercial and survey wing put down reasons for not signing the PPA. "In the interest of public," he wrote, for any power purchase done by the state, "there should be a proper process of transparent bidding to discover the competitive rate and fair price." For meeting the state's renewable power obligations, he cited the availability of other options. "There is a slump in power market and many states like Madhya Pradesh have gone into bidding route," he added, which has thrown up "the competitive rate of Rs 5.05 per unit of solar power".

Taking forward this argument, the power secretary wrote on August 19 that the tariff of Rs 5.05 per unit was significantly lower than the tariff of Rs 6.79 fixed by the state regulator for solar projects in 2015-'16, which after depreciation came down to Rs 6.06. If the government signed a power purchase agreement at these higher tariffs, it would have "huge financial implications" for the state. He referred the matter to the finance department, seeking its recommendations.

The finance department wrote back on September 15, saying the power department "should not enter into PPAs with power producers without determining reasonability and competitiveness of such offers through open bidding in view of emerging power market in India".

It remains unclear whether the state government will act on the advice of two of its key departments. Meanwhile, the price of solar power continues to drop as both Indian and international firms compete aggressively in competitive auctions across the country. Earlier this week, the world's largest renewable energy firm, SunEdison, won a bid to supply power from a 500 MW solar project in Andhra Pradesh at an all-time low of Rs 4.63 per unit.