Hyderabad: Andhra Pradesh Chief Minister Y.S. Jagan Mohan Reddy, who waded into a controversy on reviewing around 88 power purchase agreements (PPAs) signed by the previous Chandrababu Naidu-led TDP government, is expected to send a high-level team of officials to brief the Union government on the circumstances which forced him to take to this course, according to sources in the Andhra Pradesh government.
Jagan wants to avoid the impression that his two-month-old government is on a collision course with the Centre on an issue like promoting renewable sources of energy. The Chief Minister is expected to depute to Delhi his principal adviser and former chief secretary Ajaya Kallam and the top brass of the energy utilities in August. Jagan would like to assure the Centre that he was on the same page with the Centre on this issue.
The issue assumed serious proportions after Union Minister of State (Independent) for Energy and Renewable energy R.K. Singh wrote a letter to Jagan on 9 July asking him not to reopen the PPAs signed by the previous government as it would hit the sector at two levels: one, it would damage the country’s image before foreign investors who had pumped in a lot of money. Second, it would affect the targets of the Centre to achieve 1.75 GW of energy in the renewable sector by 2024-25. The Centre has fixed a target to states to see to it that at least 20% of their energy needs are met from renewable sources so that the country’s dependence on imports and fast depleting coal reserves can be halted.
There are as many as 133 PPAs in Andhra and of them, 88 were signed by the Chandrababu Naidu government in the last five years. Immediately after coming to power on 30 May, Jagan announced that he would review the PPAs signed by Naidu government as most of them had quoted higher prices when the market was falling for wind and solar power developers across the country. He set up a Cabinet committee led by Finance Minister Buggana Rajendranath Reddy to dig deep into the PPAs and ordered that the payments should be stopped till the issue was resolved. This led to commotion among private power developers who had set up their shops in Andhra. While some of them had knocked on the door of the Centre, others approached the Appellate Tribunal for Electricity (APTEL).
Jagan in his orientation remarks before the Cabinet panel last week said that the prices quoted in the PPAs were over and above the prevailing prices in any state in India. “If solar energy is available in most parts at below Rs 4 per unit, it is much above Rs 4.87 per unit here. Same is the case with wind power as most PPAs offer power at Rs 2.80 per unit, while their price crashed steeply,” the CM said.
This has also kicked off its share of political heat and dust as TDP leaders have alleged that Jagan’s move was motivated by his attempt to discredit their government and punish the private power developers who had invested in Andhra responding to the call of then Chief Minister Naidu. Naidu himself held a media conference at Vijayawada on Thursday and clarified that it was not correct to say that he had encouraged the private developers to take more from the state. “The prices have seen a sharp decline over the last five years and we signed PPAs taking into consideration both fixed costs and variable power charges prevailing at the time,” he clarified. The total volumes of PPAs for 25 years are around Rs 39,500 crore.
Kallam, a former bureaucrat who is handling the issue in the Jagan government, however, told the media on 15 July that there was a need to reduce the charges quoted by the private power developers as it has been costing around Rs 7 crore per day and around Rs 2,500 crore per year on the government. “We cannot afford to pay this much more when cheap power is abundantly available,” Kallam said. He also added, “Naturally some investors who panicked might have approached the Centre and it may have forwarded their concerns to us. This doesn’t mean that there is a confrontation between the Centre and Andhra Pradesh.”
He hinted that 70% of PPAs were signed by five firms. Meanwhile, Greenko, which signed a PPA to set up a chain of renewable energy plants in Andhra, has obtained a stay from the APTEL on the orders of Andhra government to slash its price from Rs 3.74 per KW to Rs 2.44 per KW. Interestingly, the Mumbai-based bench of tribunal also told the AP government not to stop payments as it would hear the case again on 26 August.