Jagan nixing Naidu’s contracts may hit Centre’s green target

The Y.S. Jagan Mohan Reddy led Andhra Pradesh government’s decision to terminate the green energy contracts inked by the previous Chandrababu Naidu government is likely to adversely impact the Centre’s target of installing 175 GW capacity of renewable energy by 2022, say experts.

Last year in June, Jagan’s Cabinet decided to cancel the power purchasing agreements (PPAs) linked to as many as 31 green energy projects. The Cabinet’s decision had hit companies like Siemens Gamesa and Axis Energy, besides others. Along with the PPAs’ cancellation, the Jagan government had also terminated land allotted at Anantapur to sovereign wealth funds GIC Holdings Ltd and Abu Dhabi Investment Authority’s Greenko Group’s solar-wind hybrid projects.

However, the Jagan government has repeatedly said that it will renegotiate some of the agreements, but the committee set up for renegotiation has so far failed to reach any conclusion in this regard.

Sources have confirmed that despite holding several rounds of meetings to finalise the PPA negotiation, the committee formed to renegotiate the same has been failed to reach any conclusion and the fate of more than 31 green energy projects are in limbo.

“The committee which held its last meeting on 3 December last year did not reach any decision on the renegotiation of PPAs and the biggest deadlock in finalising the PPA contracts is to demarcate the role of the Centre and states in running these green energy projects,” a source said.

The said committee is comprised of the Union power secretary, the new and renewable energy secretary, Andhra government’s principal secretary (finance), and state power secretary. The next meeting of the committee in this regard is scheduled to be held this month, according to the source.

Vijay Ravikanth, an Andhra-based project consultant, told The Sunday Guardian: “The cancelation of contracts will damage the investment potential of the state as well as the green energy prospects in the country. Instilling confidence in investors is the utmost need of the hour and if that is not done, soon the country will lose its dream of becoming a powerhouse of green energy. The Andhra government’s decision will damage India’s target of installing 175 GW green energy projects which include mostly solar and wind power projects.”

“The Andhra government is already facing a situation of cash starvation which has led to its decision of halting many infrastructure projects that have, in turn, impacted several companies such as Nagarjuna Construction Company Limited (NCC) and Larsen & Toubro (L&T), among others, and in these kind circumstances, only investments can help the state government bring the economy back on track,” Ravikanth said.

Abhijeet Wadkkar, a senior engineer formerly engaged with the Indian railways as a consultant, told The Sunday Guardian: “Cancellation of contracts or asking for reviews of big projects following regime change can create a situation of fear in the infrastructure sector. Investors would fear about investing money and the situation will add burden for the already poorly managed infrastructure sector in the country.”

“The contracts signed by the government should be considered as sacrosanct, if not, then trust deficit will dent the country’s economy and investors will fear from showing any interest in any projects. India needs massive investments in infrastructure and energy sectors. The committee formed to discuss the renegotiation should take decision on all the projects as soon as possible so that the firms don’t fear losing their money already spent on initiation of projects,” Wadkkar said.