FM allays investor concerns, says govt will honour commitments in energy pacts

Finance minister Nirmala Sitharaman on Monday assured global investors about the sanctity of power purchase contracts in India.

India’s assurance comes against the backdrop of controversial attempts by the Andhra Pradesh government to renegotiate clean energy tariffs with developers.

The Union government has pulled out all stops to try and stop the Y.S. Jagan Mohan Reddy-led state government from cancelling PPAs inked by the previous Telugu Desam Party (TDP) government.

Speaking at the India Energy Forum by CERAWEEK, Sitharaman said, “The commitment given in terms of renewable sources of energy, however big the challenges be, we will do everything to take our steps forward to make sure that the commitment to solar energy, particularly that which is given will be honoured.”

The finance minister’s statement comes at a time when India’s emerging green economy is expected to require investments of around $80 billion till 2022, growing more than threefold to $250 billion during 2023-30. India has become one of the top renewable producers globally with ambitious capacity expansion plans.

“Without taking any sides, I can well clearly tell you that the commitments will be honoured and therefore investors need not have that as a concern,” Sitharaman said.

The National Democratic Alliance (NDA) government has been trying to attract investments in the backdrop of the Indian economy battling a severe demand slowdown and liquidity crunch that resulted in the growth rate slowing to 5% in the three months ended June.

“I would like to broadly highlight the concern and the justifiable concern about honouring contractual commitments irrespective of where it emerges from or whether you have reasons for it or not...But we as a nation are concerned and we are doing everything positive to make sure commitments are honoured. That shouldn’t worry those investing or those who are interested in building capacities in India for energy or energy security,” Sitharaman said.

Global investors in Andhra Pradesh’s clean energy space include Goldman Sachs, Brookfield, SoftBank, Canada Pension Plan Investment Board (CPPIB), Japan’s JERA Co. Inc., Singapore’s GIC Holdings Pte Ltd, Global Infrastructure Partners, CDC Group Plc and World Bank’s International Finance Corp. (IFC).

Concerns about the sanctity of power purchase agreements (PPAs) have also been articulated by various global investors with states such as Uttar Pradesh going the Andhra Pradesh way for curtailing purchase of green energy. Andhra Pradesh has quoted an initial figure of ₹2.43 per unit for wind and ₹2.44 per unit for solar power tariff. Andhra Pradesh is trying to rework PPAs signed by the previous government for wind and solar power with average tariffs (FY14) of ₹4.70 per unit and ₹5.8 per unit, respectively.

The state has clarified that it will not open all PPAs, but only those where malfeasance has been established.

In response to a Mint query, Patrick Pouyanne, chairman and CEO, Total SA, on Monday said that the stability of contracts is paramount and its joint venture with French government-owned power utility Electricite de France SA (EDF) had faced issues in a “North Indian state.”

Pouyanne declined to name the state, while adding that it’s important to have contractual stability for investors.