Andhra Pradesh Chief Minister YS Jagan Mohan Reddy recently formed a committee “to review, negotiate and bring down the high wind and solar energy purchase prices.” The new government feels that the previous regime indulged in Corruption and resorted to purchasing Power at rates higher than the market rates.
The facts seem to be different, according to a report in Quartz Magazine. Andhra Pradesh has committed to buy power from renewable energy projects at fixed higher rates for up to 25 years. The rates have come down after the agreements due to the mechanism of open bidding by developers. Legal Experts say the government can not revise prices after the contracts have already been signed.
But it will still have repercussions on the sector. The government could freeze payments to wind and solar projects in the meantime and then there is a risk of these projects turning into non-performing assets. Such a move will shake the investor’s confidence and the investments will move away from the other states.
“There is no way they can do this. This is an optics move meant for Andhra Pradesh’s local population. Andhra Pradesh is a new state. It cannot be driving away investment,” industry experts warn. The Central Government already cautioned the State Government about the same.