Non-transfer of land may hit R-Infra, Adani deal

Anil Ambani’s Reliance Infrastructure (R-Infra) might need to answer a new set of questions on its Mumbai electricity distribution business sale.

A group of consumers is seeking a right to appeal against the deal at an appellate tribunal. The group is questioning the non-transfer of land parcels with the distribution business to Adani Electricity Mumbai, the new operator.

R-Infra acquired the Mumbai distribution business from a state utility, Brihanmumbai Suburban Electricity Supply (BSES) in 2003.

As part of that, land parcels measuring a combined 15,514 sq metres were also transferred to R-Infra. The Anil Dhirubhai Ambani Group’s (ADAG) headquarters is on part of this.

A group of consumers has approached the Appellate Tribunal of Electricity (Aptel) for permission to appeal on the deal in relation to this non-transfer of land. R-Infra had completed the sale in August of this business, valuing it at ~121 billion.

An e-mail query sent to R-Infra and Adani Electricity on Monday was not answered.

The consumers’ plea was to be heard at the Aptel on Monday but was adjourned at the request of R-Infra. It wanted to file a reply to the group’s application, said Anand Varma, managing partner at APT Legal, representing the consumer group at the tribunal.

“There are two appeals filed by consumers against the MERC (state power regulator) order (which cleared the deal), on the aspect of the four plots of land being retained by Reliance Infra,” he added. “The land was transferred (by BSES) to R-infra for administrative purposes and setting up substations if required. In future, if Adani Electricity needs to expand the distribution business in Mumbai, it will have to rent or buy new land which will increase the tariff (rate) costs.”

Concerns of a similar kind were raised during the public hearing at the Maharashtra Electricity Regulatory Commission (MERC), before it cleared the deal. According to the public notice R-Infra published in May, with details on the deal: “The four land parcels at Santacruz, currently part of the asset base of the licensed distribution business, are proposed to be retained by R-Infra at a consideration of ~2.5 billion.”

The value, the company said, was arrived at on the ready reckoner rates prescribed by the Maharashtra government for 2017-18.

“The users (who are seeking to file a plea with Aptel) are different from those who appealed with MERC when R-Infra was seeking clearance for the deal. However, MERC clearance was given based on a ready reckoner rate used for the land parcel value, which will not be a fair value,” Varma added.

MERC approved the deal in June. Its order had said: “REGSL will have to manage not only the office requirement but also the residential quarters/leased accommodation, within the proceeds of the Santacruz property, once RInfra is allowed to retain the plots… This condition is essential, as both the parties have given the undertaking that this transaction will not have any adverse implication on tariff.” Reliance Electric Generation and Supply (REGSL) is the entity which housed the Mumbai distribution business and R-Infra had proposed to sell the entire stake in this entity to Adani Transmission.