Gujarat’s solar flip ups the risk of a larger flop
The state’s nixing of tenders given to energy producers has put off investors. Worse, it signals an ethos of arbitrary governance and worthless commitments that could hurt our economy
Right from currency notes, which are payment promises or IOUs issued by a central bank, to complex commitments made by corporations in the course of business, an economy can hum along only if there is a consensus among all commercial actors on one thing: that agreements are inviolable. But what if there is a significant player, one armed with rule-making authority, that starts playing fast and loose with its obligations? It would spell trouble. This being so, it is hard to fathom why state governments in India show such few qualms about going back on their word and tearing up contracts awarded by them. The latest example of a state having reneged on its own deals is Gujarat. In one fell swoop, its power procurement agency cancelled tenders for 700 MW of solar power generation given to a clutch of energy producers, citing lower tariff bids in a subsequent auction. The companies left staring at Letters of Award (LoAs) that might no longer be worth the ink they bear include Vena Energy, Tata Power, ReNew Power and O2 Power.