The Andhra Pradesh government has struck a defiant note and will go ahead in renegotiating power purchase agreements with private developers, the state government said in a recent letter to the Prime Minister’s Office. Mint has seen extracts from the letter.
“We have inherited a bankrupt exchequer with a huge deficit of ₹2.62 lakh crore, the discom’s (electricity distribution companies) unpaid generator dues of ₹20,000 crore and accumulated losses of discoms of ₹15,000 crore." The letter goes on to say that the state incurred losses dues to the previous government accepting long-term tariffs that were above those being signed elsewhere in the country and because the state had chosen to procure more renewable power than coal-fired power.
“The state incurred losses due to high-cost purchases beyond renewable power purchase obligations (RPPO). Surprisingly, 70% of this power comes from only 5 producers," the letter says. “Wind energy in excess of RPPO was purchased at ₹4.84 a unit, while thermal energy was available at ₹4.2."
Accounting for the fixed costs that have to be paid for thermal power even if the power is not procured, the effective price of procurement for wind energy in the state is ₹5.94 a unit and for solar energy is ₹8.09 a unit while thermal power is available at ₹4.2 a unit. These cause losses of over ₹1500 crore a year. The letter argues that wind energy has been available at ₹2.43 a unit in Gujarat and solar energy at ₹2.44 a unit in Rajasthan, based on reverse tendering process of Solar Energy Corporation of India (SECI).
The letter says the government will conduct a free and fair enquiry and also form a cabinet sub-committee to enquire into “serious irregularities."
Last week, the central government is attempting to steer the newly elected Andhra Pradesh government away from altering existing power purchase agreements (PPAs). In a letter dated July 9, RK Singh, Minister of State for Power and New and Renewable Energy, has asked Andhra chief minister YS Jagan Mohan Reddy to not cancel PPAs unless there is a clear evidence of corruption. The new state government has indicated over the last few weeks that it will review, negotiate and bring down the cost of wind and solar PPAs tied-up by the discoms, to the consternation of private power developers like Greenko, Renew and Tata Power, public developers like NTPC and SECI, which conducts the reverse bidding process.
The AP government’s letter goes on to say that “Though we are aware of the legal nature of contracts and their importance, the divided state of Andhra Pradesh and the discoms which are in a debt trap are helpless to honour these high-cost renewable power purchase agreements done with mala fide intent."