India State to Renegotiate Renewable Pacts Citing High Rates
(Bloomberg) -- India's southern state of Andhra Pradesh will renegotiate some power purchase agreements for renewable projects to improve the finances of its electricity retailers.
The state's distribution companies, or discoms, owe 200 billion rupees ($2.9 billion) to generators mainly because of “abnormally priced” wind and solar power purchase agreements, according to a July 1 document posted on the state government's website.
“In order to ensure that consumers are provided with affordable power and discoms are pulled out of the financial distress there is a need to review and renegotiate the exorbitantly priced wind and solar power purchase agreements,” the document said.
This wouldn't be the first time a state government in India has tried to renegotiate tariffs. Andhra Pradesh and neighboring Karnataka tried to backtrack on many purchase agreements in 2017, endangering Prime Minister Narendra Modi's goal to have 175 gigawatts in renewables capacity by 2022.
The federal Ministry of New and Renewable Energy had written a letter to seven states in August 2017 asking them not to renegotiate contracts and that instruction remains unchanged, Secretary Anand Kumar said by phone.
Andhra Pradesh had 7.7 gigawatts of installed renewable and 14.6 gigawatts of fossil-fuel power capacity at the end of May, government data shows. It has created a nine-member committee to complete the negotiations and submit a report to the government in 45 days, it said. It didn't identify who the contracts are with or the price the discoms are paying.
“We're a rule-of-law country and we can't sign a contract and then back off as it affects future projects,” Shekhar Dutt, director general of industry body Solar Power Developers Association, said by phone.
To contact the reporter on this story: Anindya Upadhyay in New Delhi at aupadhyay22@bloomberg.net
To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Alpana Sarma, Abhay Singh
©2019 Bloomberg L.P.
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