Why are Indian power firms pumping money into politics?

Analysis of political funding from power firms shows that fossil fuels and renewables companies are donating to influence policy, obtain project approvals and ensure that regulatory bottlenecks are ironed out, experts say.

Power sector companies contributed 8.5 per cent of the total US$1.98 billion donated to India's key political parties by corporates and individuals over the last five years. Image: Vikramdeep Sidhu, CC BY-SA 3.0, via Flickr
Power sector companies contributed 8.5 per cent of the total US$1.98 billion donated to India's key political parties by corporates and individuals over the last five years. Image: , CC BY-SA 3.0, via Flickr

Indian power companies have spent INR14 billion (US$168 million) on political funding over the past five years.

The 2019 to 2024 data, which was released in March following an order from the Supreme Court of India, came from a controversial scheme that enabled companies to make anonymous donations to political parties.

Known as the electoral bonds scheme, it was recently struck down by the Supreme Court, which ruled it unconstitutional. Other commentators said the scheme failed to curb the use of “black money” in elections and lacked transparency.

An analysis of the data by Eco-Business reveals that power companies, which include thermal power majors, renewable energy firms as well as transmission infrastructure companies, contributed 8.5 per cent of the total US$1.98 billion donated to political parties by corporates and individuals since 2019.

The US$168 million figure for the power sector is likely higher, as numerous companies that donated large sums are part of conglomerates, such as Essel Group and Reliance, whose diversified portfolios include power.

Publication of data from the scheme has raised allegations of “quid pro quo”, or favours granted to companies in exchange for donations, a form of corruption.

The biggest power sector spenders were Kolkata-based RP Sanjiv Goenka group (US$63.1 million), followed by the Hyedrabad-based MEIL group ($30 million), Greenko group ($19.5 million), Delhi-headquartered JSW group ($17.6 million) and Ahmedabad-based Torrent Power ($13.9 million). 

Of these companies, RPSG group is predominantly in thermal power and supply, while Greenko is one of India’s leading players in the renewables sector. MEIL’s subsidiaries that made donations are in power supply and renewables. JSW and Torrent have a larger presence in the thermal sector and a significant footprint in renewables. 

Companies involved in renewables have mostly donated to parties with influence in the southern Indian states of Telangana, Andhra Pradesh, Tamil Nadu and Karnataka and western India’s Maharashtra, Gujarat and Rajasthan, where renewable energy capacity is rapidly proliferating. 

Thermal power companies have donated to parties that rule coal-rich eastern Indian states such as West Bengal and Odisha. 

“The reason why parties with regional influence got more of the funding than prime minister Narendra Modi’s Bharatiya Janata Party (BJP) is that states have a greater role in deciding and implementing power policies,” a senior bureaucrat in India’s power ministry told Eco-Business on the condition of anonymity.  

Deciphering the funding pattern 

The funding pattern reflects how the thermal power sector is confident of speedy growth in the coming years, experts say.

In recent years, India’s power sector has opened up to private sector investment, not only from the renewable energy sectors but also thermal power transmission and distribution. The sector is also set for steady growth due to the growing energy requirements of a fast-growing economy where per-capita power usage is still one-third of the global average. 

Power sector players have long been lobbying for more industry-friendly policies to ramp up growth in the sector. 

Eco-Business contacted numerous power policy experts. Most of them declined to comment about the potential for corruption in the system, one arguing that it “can only be inferred but not established.”

“Such political funding appears to have been made to influence policies, obtain project approvals and ensure that bottlenecks in the form of regulatory clearances are quickly resolved,” SP Gon Chaudhuri, a pioneering figure in introducing solar energy in India, told Eco-Business. 

Mid-sized donors are mostly in the renewables sector. They include Genus Power (US$4.6 million), Ostro Energy (US$4 million), Welspun Enterprises (US$1.5 million) and Satec Envir Engineering (US$1.4 million).

“Companies make donations to keep political parties on side that are influential in their areas of operations on their side. But the blame should not be placed on companies alone. The system would not work properly without political donations,” Gon Chaudhuri said.  

According to Mohammed Salim, a member of the Communist Party of India’s highest decision-making body, the politburo, private power companies’ political investments are aimed at expediting the privatisation process in India’s power sector. 

“India’s public sector companies still have a large share of the power sector, while governments are currently expanding the scope for privatisation. Private companies want a greater share of the sector and want to expedite the process,” Salim, a former parliamentarian, told Eco-Business. 

The CPI(M), India’s largest leftist party, was one of the litigants in the Supreme Court calling for the anonymous funding scheme to be scrapped.

“One of the adverse impacts of increasing privatisation is rising power costs, which affect not only the agriculture sector but small and medium sized industries,” he added. 

Election ‘crucial’ for power companies

The RP Sanjiv Goenka group of companies was the power sector’s biggest political donor. The group’s operations are predominantly in West Bengal state and the lion’s share of their donations of US$48.5 million went to West Bengal’s ruling party. 

The donations come off the back of the state government’s plans to expand thermal power production capacity. In February, the government announced a major boost for the thermal power sector, declaring four new thermal power units of 2.9 GW of cumulative capacity, all of which would be developed through a public-private partnership (PPP) model. 

Gon Choudhury said there are reasons to suspect that in West Bengal, where coal mining plays an important role in the economy, companies with interests in thermal power were trying to influence government policies to ensure renewable energy initiatives were sidelined.

By contrast the Greenko group, which describes itself as one of the world’s leading energy transition and decarbonisation solutions companies, mostly funded parties wielding influence in the southern states of Andhra Pradesh, Telangana and Karnataka, where a series of renewable energy projects are in the pipeline. The group spent US$19.5 million through of its subsidiaries.

Similarly, Torrent Power, which spent US$13.9 million on political funding, donated most of it to Modi’s Bharatiya Janata Party (BJP). The company has in recent years bagged several big renewables projects in states governed by the BJP or in Union Territories (UT) that the Union government directly governs.  

Energy researcher and climate activist Priya Pillai said she did not find political funding by the power sector to be surprising. Since large-scale renewable energy projects can also have adverse socio-environmental effects – and face resistance from local communities – energy firms engaged in large renewables projects are keeping the ruling party sweet to ensure the administration helps them in every way possible.

The way the union government has diluted laws that protect natural resources, community rights and the environment, it’s expected that private companies will go to any extent to support the political parties in power,” Pillai told Eco-Business.

She concluded that the coming parliamentary election is crucial for power sector companies, because the current union government that has not only created space for the private sector to exploit public resources, but also encouraged regional governments to follow suit.

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