The hard-found compromise reached last month to end the impasse over Andhra Pradesh’s decision to relook at renewable energy contracts has floundered, said several Union and state government officials.

The government led by chief minister Y.S. Jagan Mohan Reddy has upped the ante by raising doubts on the capability of the committee headed by the Union power secretary to resolve the problem. It has also raised the issue of the Centre’s assistance in times of need and has cautioned that central schemes might be hit in the absence of such help.

This comes against the backdrop of politics increasingly trumping economics in India’s federated political structure. Another case in point is the Shiv Sena-led Maharashtra government’s decision to review several high-profile infrastructure projects approved by the previous Bharatiya Janata Party government. The decision has put projects worth 7 trillion under the scanner.

The Andhra Pradesh government’s move to renegotiate power purchase agreements (PPAs) inked by the previous state government has sent the wrong signal to international investors and has serious implications for India’s ability to attract overseas investments and the perception of sanctity of legal contracts.

“Upon review with the government of AP members of the committee, it is learnt that the committee does not have a mandate to discuss the subject of long term financial solution of the problem of high cost VRE (variable renewable energy) of APDISCOMS (Andhra Pradesh Power Distribution Companies)," Andhra Pradesh’s energy minister Balineni Srinivasa Reddy wrote in a letter to Union power minister Raj Kumar Singh that was reviewed by Mint.

The committee set up on the request of the state government comprised the Union power secretary, the new and renewable energy secretary, the state government’s principal secretary (finance), and its power secretary.

Reddy also requested “that the long term solution to VRE integration cost be discussed in the committee". “There is a need to create confidence in the minds of the states that in case they face serious consequences while implementing central government policies, GoI (Government of India) will come to their rescue. Otherwise the central schemes will be approached with caution by states," the letter said.

Following this, a second meeting of the committee took place on 3 December. “However no resolution could be reached," said one of the state government officials mentioned above.

“The Andhra Pradesh government is driving a very hard bargain. It may take some time but we expect the state government to see reason," said one of the senior Union government officials cited above requesting anonymity.

This has put a spanner in the implementation of the compromise formula struck during a meeting attended by Union and state government representatives on 7 November. The formula included non-revision of those power purchase agreements (PPAs) whose tariffs have been fixed by the state electricity regulator; concessional loans to the Andhra Pradesh government by state-run firms such as Power Finance Corp. Ltd, (PFC), REC Ltd, and the Indian Renewable Energy Development Agency (IREDA) to clear outstanding dues, and waiver of interstate transmission charges for green energy to help reduce the state’s financial burden as reported by Mint on 29 November.

Other decisions reached at the meeting included the state power utility paying the generators for curtailed wind or solar power if done for reasons other than grid safety, waiving the interstate electricity transmission charges for sale of clean energy over and above the renewable purchase obligations limit to other states.

A spokesperson for the Union ministry of new and renewable energy declined to comment.

“We stand by our earlier demands. The Union government will have to find a long term solution for us given our financial deficit after creation of the new state," said a second senior state government official mentioned above requesting anonymity.

The issues assumes importance as the Andhra Pradesh government’s move has the potential to dent India’s image as a clean energy champion and comes at a time when new solar tenders of around 15,000 MW are in the pipeline.

“AP is shouldering the responsibility of fulfilling the commitments of the Government of India (GoI) in Intended Nationally Determined Contributions under the UN framework for convention on climate change," the state government had said in an 10 September communication to the power ministry reviewed by Mint.

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