Minister of Power, R.K.Singh, has written a letter to Union Home Minister Amit Shah, apprising him about his correspondence with Y.S.Jaganmohan Reddy, the chief minister of Andhra Pradesh, asking the latter not to scrap or reopen all contracts including those with no evidence of corruption.

On June 26, 2019, the new government of Andhra Pradesh decided to reopen all the PPAs signed by the previous government led by Chandrababu Naidu, alleging corruption.

In his letter to Shah, Singh wrote, “I told him (Y.S.Jaganmohan Reddy) about the impact this will have on investment in the country, especially in power and renewable energy sectors as the impression will go to the international community that in our country there is no sanctity of contracts, and nobody will want to invest.”

The situation in Andhra Pradesh has become a matter of concern for solar and wind project developers. The issue escalated in the past week with renewable developers approaching the high court for respite. However, the state government has begun curtailing power from wind projects despite the state’s high court imposing a stay on the government’s move to revisit PPA.

Recently, the Amaravathi High Court imposed a stay order on the implementation of the state DISCOM’s letter seeking a revision in the power purchase agreement for the solar PV and wind projects. The stay will be in place until August 22, 2019, after which the court will hear the matter.

Singh, in the letter, informed that the chief minister of Andhra Pradesh told him that the previous government had “indulged in corruption in signing PPAs.”

“This has alarmed the sector and investors. If this is not corrected, the foreign direct investment will stop coming, the banks will stop financing, and the growth in the renewable sector will come to a halt,” states the letter.

According to Singh, the renewable energy sector has been attracting a large amount of foreign direct investment (FDI).

“The government has set up 80,000 MW of renewable energy capacity, and this is all by the private sector and FDI. The sanctity of the contracts is the key to giving confidence to the investors to invest; without this, the growth in the renewable energy sector will come to a halt,” he added.

Tariffs for power purchase whether thermal or renewable energy is fixed by the regulator which is the Central Electricity Regulatory Commission (CERC) for inter-state supply and State Regulatory Commissions (SRC) for the supply of energy within the state.

Based on Section-62 and 63 of the Electricity Act, the generating and the distribution companies enter into PPAs for the supply of electricity usually for a period of 25 years.

“It is because of this system and the faith that these contracts will be honored that people invest in the power sector. Investments are necessary to make sure that the generation capacity is set up in accordance with our increasing requirements,” states Singh’s letter.

Earlier, Mercom reported on Singh’s previous letter to Reddy, cautioning him to practice restraint when it comes to renegotiations of PPAs for wind and solar energy projects. In his letter, Singh asked the chief minister of Andhra Pradesh to act in a manner that is fair, transparent, and according to the law.

Singh had pointed out to Reddy that reopening and canceling of a contract can only be done in cases where corruptions have been proved based on evidence. However, the state appears to have paid little attention to the center’s word of caution.