Andhra Pradesh to go ahead with review of PPAs in spite of Centre’s warning

Hyderabad: Ignoring the Centre’s warning, the Y. S. Jagan Mohan Reddy-led Andhra Pradesh (AP) government has said it will review all power agreements signed over the last five years, when the Telugu Desam Party (TDP) was in power. The YSR Congress-headed government said the existing PPAs will otherwise lead to a “burden of thousands of crores” annually for the state.

A statement from the government said the aim of reviewing the PPAs was to “bring the (state’s) power sector back on track”. It also said Andhra Pradesh was struggling with a loss of Rs.7 crore a day and Rs.2,500 crore annually due to the existing PPAs.

“Should the (AP) government remain a silent spectator to the burden of thousands of crores imposed annually on the state treasury?” asked the state government.

Last week, RK Singh, Union Minister of State for Power and New and Renewable Energy, had written to Reddy, asking him to reconsider his decision of reviewing the PPAs.

In his letter written on 9 July, Singh had said, “The renewable energy sector has brought a lot of foreign investment. Almost all the major pension funds of the world are invested in India through renewable energy companies. If the impression goes out that the rule of law does not prevail or that contracts are not honoured, then investments will dry up and growth will come to a halt."

Ajay Kallam, chief advisor to the Andhra government, who addressed a media conference in Amaravati the previous day had refused to comment on the Centre’s letter asking the state government not to alter the PPAs.

An official, requesting anonymity, however, said the Centre’s claims that investments will dry up due to the decision was “baseless”.

Singh had warned only if “a clear-cut finding is made of malfeasance in signing of PPAs, then they can be cancelled, and not otherwise.”

However, the state government, which has alleged that there were irregularities committed by the previous government, has claimed that 88 PPAs were signed in 2014 in undivided Andhra Pradesh, while the previous TDP-led government went for 133 PPAs.

“The estimated cost of long term 25-year PPAs was Rs.39,200 crores. Of the 133 PPAs made by the previous government, 70% were given to five companies,” said the official communication.

A senior TDP leader, who did not want to be quoted, claimed that major companies like Mytrah Energy Private Limited, which had signed seven PPAs with the previous state government, are on the brink of getting their projects cancelled by Jagan Mohan Reddy.

After coming to power, Reddy decided to examine existing PPAs with high tariffs to scrap the 960 megawatt Polavaram Hydroelectric Power plant and to cancel an energy storage proposal for which its predecessor had invited expressions of interest. Mint had reported on the 19 June discussion by the Andhra Pradesh Power Coordination Committee.