Solar Developers in Andhra Are Facing Risk of Loan Recall_ FICCI to MNRE

In a letter addressed to the Secretary of the Ministry of New and Renewable Energy (MNRE), the Chairman of the Federation of Indian Chambers of Commerce and Industry (FICCI), urged the ministry to intervene in the Andhra Pradesh tariff reduction case, which is being heard in the state’s High Court.

The FICCI Chairman highlighted the plight of independent power producers. They had approached the Andhra High Court against an arbitrary decision taken by the state government to reduce the solar and wind tariffs after power purchase agreements (PPAs) were concluded.

Subsequently, a letter issued by the Andhra Pradesh Southern Power Distribution Company Limited (APSPDCL) threatened to terminate the PPA if the developers didn’t adhere to the government’s decision.

The letter elaborated that although the Andhra High Court’s order dated September 24, 2019, set aside the government’s order and the APSPDCL letter, the court allowed the DISCOM to approach Andhra Pradesh Electricity Regulatory Commission (APERC).

The APERC directed the DISCOM to make payments of outstanding and future invoices at the “interim” rate of ₹2.44 (~$0.033)/kWh and ₹2.43 (~$0.0.033)/kWh for wind and solar, respectively until the governing body resolves the dispute.

The FICCI Chairman stated that the aggrieved generators had filed another appeal before the division bench of the High Court, which is pending since December 2019.

The developers have further claimed that the state DISCOMs have not paid them since August 2018, even at the reduced tariffs. Despite the order passed by the High Court on December 20, 2019, directing the DISCOMs to make payments at the reduced interim tariff, generators received complete payments at reduced tariff only in July 2020, according to the letter.

Further, between December 20, 2019, until the date of payment, generators have had filed various applications for the enforcement of the December order, resulting in incurring high legal expenses apart from the revenue loss on account of the reduction in the tariff.

The letter also draws attention to the excessive ‘illegal’ curtailment of electricity by Andhra Pradesh Transmission Corporation (APTRANSCO) and Andhra Pradesh State Load Despatch Center (APSLDC), resulting in the huge generation and revenue losses.

The last hearing in the matter was held on March 12, 2020, at the Andhra High Court, before COVID-19 threw a spanner in the works. The pandemic has severely affected the generators who had to supply electricity, pay salaries and payments to vendors, despite receiving late payments at a reduced tariff.

Several pleas have been filed for an urgent listing of appeals before the state High Court. The letter stresses that developers need to be paid the full PPA tariff to meet operational obligations.

The FICCI Chairman requested the MNRE to help them in the following matters:

  • Instruct the Assistant Solicitor General AP High Court to give a written representation to the Registrar General to list the pending case for expeditious hearing
  • Advise the Department of Energy, AP to file a joint representation along with the generators before the Andhra High Court for expediting the hearing;
  • Order the Andhra government to make payments at full PPA tariff to ensure the viability of the renewable projects
  • Recommend the Andhra government to intervene and expeditiously resolve the issue without resorting to further litigation.

The letter warns that the developers are facing the risk of recall of loan facilities, which could shut down the projects.

Last year, expressing its apprehension over the Andhra Pradesh government’s decision to revisit the PPAs, the central government had earlier stated that no contractual agreements could be reviewed as such an act would not only disturb the national goal of renewables but will also impede the confidence of the investors.

Read Mercom’s article on how the Andhra Pradesh episode sets a bad precedent for the rest of the states.