Centre warns Jagan again on review of energy deals

A month after its first letter to the Chief Minister of Andhra Pradesh Y S Jaganmohan Reddy asking him to desist from revisiting the power purchase agreements (PPA) of the previous government of Nara Chandrababu Naidu, the Centre seems to be worried about the move of the incumbent chief minister.

On Tuesday, Union Minister of State (independent charge) for Power and Renewable Energy, R K Singh wrote a letter to chief minister Jagan Reddy reminding him that revisiting the PPAs would halt the flow of foreign investments in the sector, which is very important for India for environmental and power needs.

The two-page letter to Jagan included documents on fixing of tariffs by the independent regulatory bodies i.e. the Central Electricity Regulatory Commission at the national level and the State Electricity Regulatory Commissions at the state level.

“Power purchase agreements are contracts binding on all signatories. If the contracts are not honoured, the investments will stop coming. For the above reasons, it will be wrong and against the law to cancel all the PPA,” R K Singh wrote. He informed the chief minister that the contracts can be cancelled only when there is prima facie evidence of corruption.

He opined that the finding of irrational tariffs is not sufficient to cancel the contracts. “There will also need to be concrete evidence of malpractice to be able to come to a finding of corrupt practice in a particular case," he said, adding that action can be taken only in cases where there is clear-cut evidence. Almost all major pension funds of the world have invested in India through renewable energy companies, Singh added.

On 26 June, Jagan formed a cabinet sub-committee to revisit the power purchase agreements made during the Chandrababu Naidu regime from 2014 to 2019. He concluded that the state suffered a loss of Rs 2,636 crore on account of the irrational tariffs fixed by the government. He directed the Cabinet panel to initiate the recovery of the money from respective companies failing which the deals would be cancelled.

Central Renewable Energy secretary Anand Kumar had informed in his June 7 letter that India has set a goal to achieve 175 GW renewable energy by 2022 and AP’s move would affect the flow of investments.