Rationalise tariffs, don't blame renewable: Power minister to Andhra govt

R K Singh, Union minster for power and new & renewable energy, in his latest letter to the Andhra Pradesh government blamed the state’s power distribution companies for its dire financial situation. The minister said the discoms were not making regular and rational tariff revisions, thereby, making losses.

This is the second letter in two months by the Union ministry to the Andhra Pradesh government after the state decided to review all the renewable power projects, citing high costs.

“The financial situation of discoms of Andhra Pradesh is certainly a matter of concern. However, this could not be attributed to renewables. The costs incurred on purchase of power are passed through tariffs,” said the letter dated Friday.

It said the present situation of the discoms was due to the fact that against the proposed increase in tariff for Andhra Pradesh as per UDAY norms, of 3.6 per cent in 2016-17 and 5 per cent each in 2017-18 and 2018-19, the actual increase was only 0.81 per cent, 4.5 per cent and zero, respectively.

“It is requested that the tariffs be rationalised each year according to the norms,” it said. Business Standard has reviewed the letter.

In July, the newly formed Andhra Pradesh government, led by NDA ally YSR Congress Party, formed a high-level negotiation committee to “review, negotiate and bring down” tariff of all competitively bid and won renewable power projects in the state.

Andhra in its order to review “high tariff” cited the poor financial status of its power distribution companies (discoms) as the reason to review the tariff. The state discoms have dues of Rs 20,000 crore to power generating companies. Its annual net income stands at a loss of Rs 1,563 crore, as last updated on UDAY portal.

The minister has also cited the wind and solar tariff of Andhra which is at par with country’s average and at times lower than other states. The feed-in tariff of Rs 4.84 per unit in 2016-17 in the state was lower than Rajasthan (Rs 5.76/unit), Madhya Pradesh (Rs 4.78/unit) and Maharashtra (Rs 5.56/unit).

“Unlike thermal power, the entire investment in wind and solar power is made upfront i.e at the time of installation itself and operational costs are very small. Therefore the nominal tariff declines in real terms over time,” said the letter.  

The minister urged the Andhra chief minister to keep investor’s concerns in mind while taking a decision. He said the state government can establish mala fide intentions in any particular project and take action but should not base it on just apprehension of irregularities.  

Last month, MNRE secretary urged the state to not cancel any renewable projects as it will have serious ramifications over investment in the sector. Of the total dues of close to Rs 10,000 crore to renewable power projects, Andhra tops the list with more than Rs 2,500 crore.