Power purchase agreement: Honour contracts, don’t halt growth, Centre tells Andhra Pradesh
In an attempt to persuade Andhra Pradesh chief minister YS Jaganmohan Reddy against revising power purchase agreements (PPAs) with renewable power producers, which is seen as a blow to the sanctity of contracts and could potentially hurt investor sentiments, Union power minister RK Singh has written to the state to take a cautious approach in this matter. Congratulating Reddy on his recent election victory in a letter, reviewed by FE, Singh wrote: “If an impression goes out that the rule of law does not prevail or the contracts are not honoured, then the investments will dry up and growth will come to a halt.”
The new government in Andhra Pradesh has formed a committee to revise “abnormally priced wind and solar” PPAs, saying these have “resulted in unjustified burden on the consumers of the state”, besides contributing to the financial woes of state-run discoms. It believes that many of these agreements were signed with “malafide intentions”.
