High Court stays Andhra Pradesh order on green projects for a month

Solar & wind firms called project cancellation 'illegal, unconstitutional'

In a breather for clean energy firms involved in over 7,500 Mw of renewable power projects, the Andhra Pradesh High Court on Thursday stayed the proceedings of a state government’s committee looking to cancel all such work awarded in the state. The stay is for four weeks, after which the high court will look into the legality of the decision of the state government to lower the tariff of all renewable projects awarded under the previous regime.

The newly formed YSR Congress-led government had formed a high-level negotiation committee (HLNC) to “review, negotiate and bring down” the tariff of all competitively bid and won renewable power projects in Andhra Pradesh.

The decision was part of an order that the energy department had issued to all stakeholders of the renewable industry. The department has cited the poor financial status of its power distribution companies (discoms) as the reason for reviewing the tariff. The state discoms have dues of Rs 20,000 crore. Their annual net income stands at a loss of Rs 1,563 crore, as last updated on UDAY's portal.

“Power discoms in the state are in a financial crisis. One of the major reasons for this is the issue of abnormally priced wind and solar power purchase agreements in recent years. 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 (PPAs),” said the order. 

The state government in its further notices and presentations said the PPAs signed by the previous government were inked with “malafide intentions” and could have resulted in an unjustified burden on the consumers of the state. The state government in its notice said it wants to fix the tariff of several wind power projects at Rs 2.25 per unit.

The Indian Wind Power Association, a dozen wind power companies and a couple of solar companies — ACME Solar and Wareee Energy — moved writ petitions to the high court. Greenko Energy, which is based in Andhra Pradesh, said in its petition that the decision of the state government to revise the PPAs was “arbitrary illegal unconstitutional and also violative of principles of natural justice".

ACME Solar Holdings said the action taken by the state under the notice was contrary to the provisions of the Electricity Act, 2003, besides being violative of the petitioner’s rights guaranteed under Articles14 and 191g of the Constitution.

The high court ordered a stay on any proceeding of the HLNC, said sources. This would mean no review of the tariff could be done in the coming four weeks. Industry executives said this was a temporary measure and would unlikely to provide any major relief. 

“The state already lags in paying renewable power project developers. Pending dues are of more than six months. The stay is only on the revision of power tariffs,” said an executive, Rating agency Crisil in a recent report said the review of tariffs and PPA cancellations could put additional stress on about 5.2 Gw of wind and solar energy projects with an estimated debt exposure of over Rs 21,000 crore. 

“Nearly half of the above capacities are higher risk of default since they lack liquidity support beyond project level,” the rating agency said.