NEW DELHI: Power minister RK Singh has brought home minster and ruling Bharatiya Janata Party president Amit Shah in the loop on the Andhra Pradesh government’s decision to renegotiate tariffs for over 5 MW renewable energy projects. This indicates high-level political intervention with the state leadership to prevent possible dent in investor confidence.
According to sources, Singh earlier this week conveyed to Shah the alarm among investors caused by the YSR Congress government’s June 26 order to renegotiate PPAs (power purchase agreements) signed during the Telugu Desam Party’s rule and the negative impact it could have on India’s investment climate, particularly in the power sector.
Rating agency CRISIL reckons the state government’s order, stayed by the Andhra Pradesh high court on Thursday, could jeopardise wind and solar power projects with a debt exposure of over Rs 21,000 crore and aggravate the problem of delayed payments from distribution companies.
Before bringing Shah in the loop, Singh had spoken to Andhra Pradesh chief minister Jaganmohan Reddy and followed up his conversation with a letter cautioning against any witch-hunt. The basic thrust of power minister’s argument is that the tariffs are cleared by independent regulators, while PPAs are legal contracts and binding on all signatories.
Reopening of PPAs across the board, instead of acting in specific cases where corruption or wrong-doing is evident, will send a wrong signal to investors that there is no sanctity of contracts in India. This will drive away private and foreign direct investments, which have funded a large part of the present 80 GW (giga watt) of renewable energy capacity.
The ministry has also explained to the state government that solar or wind tariffs cannot be the same in every state because of variation in factors such as the brightness and duration of sunlight, cost of land, distance across which power from a project has to be wheeled and cost of financing.
After coming to power, the Jaganmohan Reddy-led government decided to examine PPAs with high tariffs, scrap the 960 MW Polavaram hydel plant and an energy storage proposal for which his predecessor, Chandra Babu Naidu had invited expressions of interest.
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