Soon after assuming office in May 2019, Andhra Pradesh chief minister YS Jaganmohan Reddy had revised the PPAs, signed by the previous government, with solar and wind projects of around 8,000 MW in the state.

Fearing a repetition of the 2019 event when Andhra Pradesh had unilaterally revised power purchase agreements (PPAs) to reduce renewable energy tariffs, solar and wind developers have written to the Punjab government requesting it not to revise tariffs of renewable energy-based electricity being supplied to the state. According to sources, the Punjab Electricity Development Agency had met officials from major renewable energy players on October 29 with the agenda to discuss the prospects of tariff reduction.

Industry sources said that such a move can impact around 1,000 mega-watt (MW) of solar generation capacities which had signed PPAs with the state between 2013 and 2016. The tariffs of these projects are generally around Rs 7/unit, which is much higher than the rates of around Rs 2.2/unit-2.6/unit being currently discovered in competitive biddings in the country. Sources said some of the solar projects that can be affected if Punjab decides to cut tariff are owned by firms such as Azure Power, Adani Green and Acme Solar.

The development comes at a time when the state is looking to reduce its power purchase costs amid lower revenue realisation by its electricity distribution company (discom). The Punjab government said on Monday that it will reduce power tariffs for domestic consumers by Rs 3/unit. An official from the industry said that the companies have calculated their returns on investment based on the tariffs agreed earlier, and have accordingly made huge investments. “If the same (tariff) is curtailed or refused, it would affect the substratum of their financial arrangement and would drive them into heavy unserviceable debt,” the person added.

The renewable energy industry is one of the major FDI earners and Andhra Pradesh’s decision to revise tariffs of renewable energy projects has already created a stir in the industry and hit the national mission to have 175 giga-watt of renewable energy capacity by 2022. Soon after assuming office in May 2019, Andhra Pradesh chief minister YS Jaganmohan Reddy had revised the PPAs, signed by the previous government, with solar and wind projects of around 8,000 MW in the state.

The matter is now before the Amaravati High Court. Though not amounting to PPA-cancellation, Gujarat too, in February this year, had suspended the process for signing PPAs for 700 MW solar capacity with the winners in the auctions held earlier. In June, Uttar Pradesh also refused to sign PPAs for 150 MW of solar power with the winners of the reverse auction held in February 2020.

As FE reported in July, Punjab’s former chief minister Captain Amarinder Singh had asked the state’s discom to examine all PPAs signed by the erstwhile SAD-BJP government with various private power plants, and revise or cancel the contracts “that are not beneficial to the state”.

The state government has also reportedly announced the termination of the PPA with GVK’s Goindwal Sahib plant, and is also said to be bringing a legislation in the upcoming state assembly session to rework PPAs with two other private thermal power plants.