Andhra Pradesh solar units face under-recovery of Rs 5,000 crore — Know who’s responsible

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Published: July 18, 2020 6:00 AM

Higher open access charges to double solar/wind power cost to large consumers

Andhra Pradesh discoms have reported a loss of Rs 16,736 crore in FY19, up from a Rs 546-crore loss in the previous fiscal.

Solar and wind power plants in Andhra Pradesh, with aggregate capacity of 8,000 mega watt (MW), have claimed that their under-recovery owing to inadequate tariff payments by the state discoms have reached a staggering Rs 5,000 crore. What has caused the crisis is the state government’s decision to retrospectively amend the power purchase pacts, citing malpractices.

As per Andhra Pradesh High Court’s September 2019 order, the state-owned power distribution companies (discoms) are paying these plants at a provisional rate of Rs 2.43/unit, against the Rs 4.84/unit tariff approved by the state power regulator earlier under the previous state government, leading to the financial stress of the renewable power producers. To add to their woes, the state government is amending its solar and wind power policies, effectively withdrawing the incentives which were offered to these plants earlier to promote renewable energy in the state.

Suspending older provisions, the state government, led by chief minister YS Jaganmohan Reddy, has asked the electricity regulator to levy transmission and distribution charges for wheeling power for wind and solar plants which sells electricity directly to industrial consumers through the open access mechanism. This can raise power costs by as much as Rs 5/unit (Rs 3/unit wheeling charges, Rs 1.5/unit cross subsidy charges and Rs 0.5/unit distribution charges), rendering these sources unviable for open access consumers resulting in these projects losing customers.

The state government, against the advice of the Union power ministry, had formed a committee to revise “abnormally priced wind and solar” power purchase agreements (PPAs), saying there might have been linked with “malafide intentions” and could have “resulted in unjustified burden on the consumers of the state”. Although the AP High Court had struck down the state government order on renegotiating PPAs, it had asked the state electricity regulator APERC to decide on the matter and directed the discoms to pay reduced prices in the interim period.

Renewable energy producers believe that the state power regulator and the Amaravati High Court would ultimately mandate paying full tariff to the state’s discoms, and clearing such huge payment immediately will not be possible for the state causing further delay in clearing the outstanding bills. “We would therefore request that under the discom liquidity package, there should be a separate carve out of money to the tune of `5,000 crore for AP discoms, so that such amount can be immediately paid to renewable energy generators once the court orders are issued on these pending petitions,” the national solar energy federation of India said in a recent letter written to Union power minister RK Singh.

Singh had earlier said that the move “has alarmed the sector and the investors” and “if this is not corrected, the FDI will stop coming, the banks will stop financing, and the growth in the renewable energy sector will come to a halt”. Since FY15, FDI in the renewable energy sector has been a whopping $4.8 billion. The state’s decision persuaded the Centre to take steps to ensure sanctity of contracts and regular payments to power producer.

Andhra Pradesh discoms have reported a loss of Rs 16,736 crore in FY19, up from a Rs 546-crore loss in the previous fiscal, and the state government has blamed high cost renewable energy for its distress. However, audited data has shown that the state clearing only 21% of the subsidies claimed by discoms and deteriorating payment collection efficiency also played major roles in the spiraling of losses.

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