india

Updated: Jul 25, 2019 18:05 IST

In a setback to the YSR Congress government headed by chief minister Y S Jagan Mohan Reddy, the Andhra Pradesh high court on Thursday stalled the government order to review various power purchase agreements (PPAs) signed by the previous Telugu Desam government in the last five years.

A division bench of the high court headed by Justice M Ganga Rao, which heard a batch of petitions filed by nearly 40 private solar and wind power producers, ordered that the government order (GO. No. 63) be suspended for a period of four weeks and posted the case to August 22 for further hearing.

The court also suspended the letter written by Andhra Pradesh Southern Power Corporation Limited (APSPCL) to the power producers on July 12, summoning them for re-negotiations on power purchase agreements.

Senior Supreme Court advocate Mukul Rohatgi, who argued on behalf of the power companies, said the state government had absolutely no powers to renegotiate the PPAs and revise the tariffs, as it amounted to infringing upon the powers of the electricity regulatory commission.

“The regulatory commission fixes the power purchase rates after lengthy arguments by the power producers and also state power distribution companies (Discoms), besides taking the opinions of the common people through public hearing. Once the contracts are signed, the Discoms have to abide by the rates,” he argued.

State advocate general Sriram Subrahmanyam argued that the state government could review the PPAs and negotiate with the power producers to reduce the prices in the wake of steep fall in power rates across the country. “The state government is only trying to pass on the benefits of the lower tariffs to the consumers,” he said.

On day one of assuming power in the state on May 30, Jagan had announced his decision to review the PPAs signed with solar and wind power producers on the pretext that the agreements smacked of huge corruption, resulting in a loss of over Rs 2,200 crore to the state exchequer.

Within a few days, he appointed a cabinet sub-committee headed by finance minister B Rajendranath Reddy to review the PPAs and renegotiate with the power producers to bring down their tariff.

However, the decision snowballed into a major controversy with the NDA government at the Centre intervening and asking the state government to revoke the decision. On July 9, Union minister of state (independent charge) for power and renewable energy R K Singh wrote a letter to the chief minister warning that revisiting the PPAs would halt the flow of foreign investments in the sector, which is very important for India for environmental and power needs.

The Union minister, however, virtually ruled out irregularities in signing the PPAs and attached documents pertaining to bidding by the power producers. He pointed out that the tariffs were fixed by the Central Electricity Regulatory Commission at the national level and the State Electricity Regulatory Commission in respective states.

“Power purchase agreements are contracts binding on all signatories. If the contracts are not honoured, the investments will stop coming. For the above reasons, it will be wrong and against the law to cancel all the PPAs”, he wrote to the chief minister.

On Tuesday, credit ratings agency CRISIL also warned that the chief minister’s controversial plan to review PPAs could bring 5.2 giga watts (GW) solar and wind energy projects with an estimated debt exposure of over Rs 21,000 crore under stress.

The agency also said Jagan’s decision had also caused concern among the investors and might aggravate the problem of delayed payments from distribution companies (Discoms) and added that around Rs10,600 crore may be at an immediate risk of default.