Japan has cautioned the Andhra Pradesh state government against its decision to reduce tariffs on signed purchase power agreements (PPAs), as it will result in investors losing confidence, reported Economic Times.

Andhra Pradesh is one of the leaders in clean energy, which had seen renewable energy investors from France, South Africa and Europe.

Pointing out that this will not only harm the business environment of the state but also hinder its move to cleaner sources of energy, the Japanese Ambassador to India has requested the Chief Minister, Jaganmohan Reddy, to honour the contracts. Moreover, the report noted that developer companies are funded by overseas sovereign and pension funds which will be impacted by these reduced tariffs.

The report stated that Reddy had claimed that the renewable PPAs were improperly signed and sealed at higher tariffs by the previous government. Reddy has formed a committee to review these PPAs which has irked the project developers as per the report.

Andhra Pradesh saw a regime change after the May 2019 elections, with YS Jaganmohan Reddy from the YSR Congress Party replacing Telugu Desam Party’s N Chandrababu Naidu as Chief Minister.

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Two major renewable energy developers in India— ReNew Power and SB Energy— are heavily backed by Japanese investments. The former claims to be India’s largest independent power producer with a capacity of over 7 gigawatts (GW). And the latter has business dominance in natural power combined with artificial intelligence and electric vehicles.

Japan's embassy and India's Power Ministry have addressed letters to Reddy to reconsider his decision.

The Andhra Pradesh Chief Minister had spoken about finding a middle ground in an outreach programme last week, to consider the interests of the foreign investors as well, reported the daily.