Coming down heavily on the state distribution companies, the Andhra Pradesh High Court at Amravati has directed the Andhra Pradesh distribution companies (DISCOMs) to clear the dues of solar and wind developers within four weeks.

The state DISCOMs have been called out by the court for their negligent attitude towards clearing the dues of the developers.

This development comes on the heels of an earlier court order that had quashed the state government’s letter issued to renewable developers to reduce their quoted tariffs.

Considering the health of the distribution companies in the state, and the fact that developers need liquidity to keep the projects in operation, the court had directed them to immediately pay ₹2.43 (~$0.0341)/kWh and ₹2.44 (~$0.0343)/kWh to wind and solar developers respectively. However, this was only an interim relief for the outstanding payments by the DISCOMs. The court had then said that the interim arrangement is being suggested to balance the interests of both parties.

The developers apprised the court that the DISCOMs were not even complying with the order delivered by the bench and requested that the DISCOMs be directed to make the full payment.

The Amravati High Court has taken serious objection to the approach of DISCOMs and directed them to submit a schedule of payment on an affidavit.

Now, the state DISCOMs have submitted an affidavit to make the payment within four weeks from December 20, 2019.

Aditya K Singh, an advocate at HSA Advocates, told Mercom, “Due to payment default from DISCOMs, various developers were on the verge of declaring non-performing assets (NPA). Recognizing the difficulties faced by the developers, the High Court directed them to make the payment within four weeks. This order should send the right signal to investors about contract enforcement.  A long-standing deterrent to foreign direct investment in the renewable industry is weak enforcement of binding contracts.”

On behalf of the state DISCOMs, Santosh Rao, the chief general manager, Investment Promotion Cell (IPC)/APSPDCL, verified the development and stated that the “contents in the counter affidavit are based on the records and are believed to be true and correct.”

The copy of the counter affidavit reviewed by Mercom states that this includes 220 wind power purchase agreements (PPAs) and 47 solar PPAs.

Considering the volume of renewable power covered under the PPAs (up to November 30, 2019), the pending bills of these developers amounts to ₹14.5 billion (~$205 million).

According to the affidavit, as of August 2019, the power utilities of Andhra Pradesh state had a debt of ₹600 million ($8.5 million). However, after the order of the court, some of the pending bills have been discharged by raising loans.

“As of today, a total of ₹3.5 billion (~$50 million) have been paid, and the balance of ₹10.9 billion (~$154.7 million) is still lying due,” states the affidavit.

Recently, it was reported that the Andhra Pradesh High Court stayed the notice issued by the Andhra Pradesh Electricity Regulatory Commission for public hearings to revise solar tariffs.

According to Mercom India Solar Project Tracker, Andhra Pradesh accounts for 3.4 GW of large-scale solar projects in operations, and approximately 1.7 GW of projects are under the development pipeline. According to the MNRE, Andhra Pradesh has 4.1 GW of wind power capacity as of October 2019.