india

Updated: Sep 24, 2019 16:10 IST

The Andhra Pradesh high court on Tuesday dismissed a petition of solar and wind power producers opposing the YSR Congress party government’s decision to review power purchase agreements (PPAs) signed with the previous Telugu Desam Party government.

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, suggested that they could approach the AP Electricity Regulatory Commission rather than coming to the court.

The high court had on September 18 reserved the judgment in the cases filed by renewable energy companies against the state government’s renegotiation bid.

“The court cannot decide on the matters that are under the purview of the regulatory commission. The petitioner can raise their objections before the commission,” the high court bench said, and directed that the commission could resolve the issues within six months.

The court felt that the government could issue notices to the power producers as per law and stop power generation when it does not require the power supply.

The court, however, set aside the government order (GO No. 63) dated July 1, which called for appointment of the expert committee to renegotiate the PPAs signed with various renewable energy companies, since the government has told the court that it would approach the APERC, instead of directly reviewing the PPAs.

The only relief to the power producers is that the division bench directed AP power distribution companies to continue power purchase from them at a tariff of Rs 2.44 per unit till the disposal of the matter by APERC.

It has also directed the state to avoid curtailing generation from renew able power plants without issuing any prior notice.

During the course of hearings, the power producers had argued that the state government had no say in the contracts which were signed between the distribution companies and the developers and that since the PPAs were approved by the regulatory commission, they could not be renegotiated.

The state government, however, argued that the previous government had favoured a few companies by signing high cost PPAs, causing huge loss to Discoms and hence, was going in for review to revise the tariffs downwards.

Subsequently, the state government told the court that it would approach the regulatory commission again to revise the PPAs, instead of doing it through expert committees.

On the day he took oath as chief minister on May 30, Jagan announced his decision to review the PPAs signed with solar and wind power producers claiming that the agreements smacked of huge corruption that caused a loss of over Rs 2,200 crore to the state exchequer.

Almost a month later, 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 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 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.

Credit ratings agency CRISIL also warned that the Jagan’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 ₹21,000 crore under stress.

The agency also said Jagan’s decision also worried investors and might aggravate the problem of delayed payments from distribution companies (Discoms) and added that around ₹10,600 crore may be at an immediate risk of default.