NEW DELHI :
The Y.S. Jagan Mohan Reddy-led Andhra Pradesh government’s controversial plan to reopen power purchase agreements (PPAs) inked under the previous TDP government could bring 5.2 giga watts (GW) solar and wind energy projects with an estimated debt exposure of over ₹21,000 crore under stress, ratings agency CRISIL said in a report on Tuesday.
The move that has caught the attention of the Centre and investors could also aggravate the problem of delayed payments from distribution companies (discoms), the report said and added that around ₹10,600 crore may be at an immediate risk of default.
“People have faith in the Indian legal system and that is why we don’t see that this would affect our future bids. Indian renewable energy sector is supported by investments from across the globe. Our stand is very clear. Any legal contract that has followed the due process can’t be negated unless a malafide or corruption case is established," new and renewable energy secretary Anand Kumar told Mint.
India has become one of the top renewable energy producers globally with ambitious capacity expansion plans. India’s emerging green economy will require additional investments of around $80 billion till 2022, growing more than threefold to $250 billion during 2023-30.
“The AP order, issued on July 1, 2019, directs a high-level negotiation committee to use current rates, rates prevalent at the time of commissioning of projects, and the current opportunity cost of other sources of power to benchmark and renegotiate agreements, and also submit its report to the state in 45 days," the CRISIL report said.
In an attempt to defuse the brewing legal crisis in Andhra Pradesh that may derail India’s clean energy run, union power minister Raj Kumar Singh had written to the state government citing danger of investor confidence eroding. The state government, however, has decided to go ahead with its plans of the PPA review. Singh, in his letter, also said the tariff for solar and wind energy projects in the states will be different depending upon solar radiation and wind speed.
The communication, reviewed by Mint, stated, “It will be wrong and against the law to cancel all the PPAs. The appropriate course will be that the action for the reopening and cancelling of contracts is only taken in those cases where a primae facie case of corruption is made out based on objective evidence."
The National Democratic Alliance (NDA) government at the Centre is pulling out all stops to impress upon the state government to not cancel the previous Telugu Desam Party’ (TDP)-led government’s decision to ink PPAs for the projects in the so called “in- pipeline," as it would have a wide ranging impact on foreign investments. Andhra Pradesh has around 7,700 mega watt (MW) of solar and wind projects.
“We are also with you in your campaign against corruption and would like to see that corrupt meet their just deserts. However, we have to move in a manner which is fair and transparent and according to the law. If we do not so, the investment process and development will come to a halt," Singh’s letter said and added, “The Power Purchase Agreements are contracts binding on all signatories. If the contracts are not honoured, the investment will stop coming."
The country has an installed renewable energy capacity of about 80 gigawatts (GW) and is running the world’s largest renewable energy programme with plans to achieve 175GW by 2022 and 500GW by 2030, as part of its climate commitments.
“A quick resolution here is also necessary to prevent vitiating of investor confidence in the sector, which is crucial to achieving the central government’s goal of 175 GW renewables capacity by fiscal 2022," the CRISIL report said.