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Centre to Andhra govt: Respect existing PPAs for renewable energy

“The Ministry has written to the Andhra Pradesh government that they should respect the power purchase agreements. If there is no corrupt motive, PPAs must be respected,” said a central government official who did not wish to be quoted.

By: ENS Economic Bureau | New Delhi |
August 5, 2021 3:02:15 am
After a review, the state government proposed to pay Rs 2.44 per unit for wind and solar power as against an average wind power tariff of Rs 4.8 per unit for existing PPAs till the issue was resolved.

The Power Ministry has written to the Andhra Pradesh government advising it to “respect” existing power purchase agreements (PPAs) with renewable energy suppliers. The state is currently in the midst of a legal battle with a number of renewable energy suppliers after it decided to renegotiate tariffs with renewable power suppliers for PPAs that were signed by the previous government.

“The Ministry has written to the Andhra Pradesh government that they should respect the power purchase agreements. If there is no corrupt motive, PPAs must be respected,” said a central government official who did not wish to be quoted.

The Andhra Pradesh government had, in 2019, ordered the review and renegotiation of existing PPAs between power distribution companies (discoms) and wind and solar energy suppliers. The order by the government noted that discoms in the state were in a financial crisis and had major outstanding dues and that “one of the major reasons for this is the issue of abnormally priced wind and solar power purchase agreements entered in the recent years.”

After a review, the state government proposed to pay Rs 2.44 per unit for wind and solar power as against an average wind power tariff of Rs 4.8 per unit for existing PPAs till the issue was resolved.

A single-judge Bench of the Andhra Pradesh High Court had ordered that discoms pay Rs 2.44 per unit to suppliers till a final judgment is passed in the matter. Power suppliers have, however, appealed against the ruling and called for a speedy resolution claiming that lower tariffs coupled with delayed payments from discoms were putting them in danger of bankruptcy.

Credit ratings agency CRISIL has noted that the order by the Andhra Pradesh government to review tariffs under existing PPAs could lead to financial stress for 5.2 GW of renewable energy projects with estimated debt exposure of Rs 21,000 crore.

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