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Andhra to revise contracts signed in Naidu’s tenure

New Delhi: Jagan Mohan Reddy-led Andhra Pradesh government has decided to renegotiate wind and solar power purchase contracts signed during the tenure of his predecessor N Chandra Babu Naidu, a move that may impact several projects. 

The state has about 8,364 mw of solar and wind projects, of which 6,614 mw capacity is commissioned and 1,750 mw is under construction. The decision may impact a large chunk of these contracts, industry insiders said. 

The state on Monday constituted a high-level committee to negotiate and reduce costs of “abnormally priced” wind and solar power purchase agreements (PPAs) entered between developers and state distribution companies during the Naidu regime. 

Bridge to India managing director Vinay Rustagi called the decision unfortunate and without any economic or market rationale. “It could be motivated politically or even by the discoms’ dire financial position,” he said. “Almost all projects/ tariffs have been awarded through open competitive auction processes and all have been approved by the state regulator. Therefore, we don't believe that there is any chance of successful renegotiation. India has a very strong legal process for resolving such .. 

The order said power distribution companies in the state are in financial crisis with huge power purchase dues amounting to about Rs 20,000 crore as on date. “In order to ensure consumers are provided with affordable power and discoms are pulled out of financial distress there is a need to review and renegotiate exorbitantly priced wind and solar power purchase agreements.

The committee has been directed to complete negotiations and submit a report within 45 days, following which the state’s transmission, distribution and renewable energy department will take action. 

 

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