According to reports,The Centre has taken a stern view of state distribution companies violating contracts by bullying solar and wind power developers to cut prices, which bankers say will discourage lenders and investors.
The minister for power, coal, renewable energy and mines, Piyush Goyal, has expressed concern at the development and has opposed violation of contracts that have already been signed. Goyal is spearheading India’s massive expansion of renewable energy capacity, which has made India world leader in growth of wind and solar generation.
“The government view is very clear that the legal framework has to be respected.
All PPAs, whatever the legal terms are, they will be respected. But if a PPA has a mutual negotiation clause, and somebody is willing to do it, then what can be done?” he told ET.
Fierce competition in solar and wind power auctions along with falling prices of equipment have helped tariffs tumble to record lows, making older projects look very costly. This has prompted many state discoms to ask project developers to sell electricity at the lowest available rate even if the contract for a particular plant was signed when costs were much higher.
A government official said the Centre was considering sending an advisory to states, cautioning them about the adverse implications of their efforts to arm-twist companies to cut rates. The Indian Banks Association has also written to the power and finance ministries saying that the action by states was threatening the viability of projects, which in turn would make their loans risky.
States where project developers are being pressured to cut tariffs include Tamil Nadu, Andhra Pradesh, Karnataka, UP and Jharkhand. Government officials said that renewable energy projects are a key part of India’s efforts to meet its climate commitments and to reduce the use of polluting fossil fuels, and the effort to promote clean energy has the strong backing of Prime Minister Narendra Modi. At a recent meeting with the wind developers and state nodal agencies for renewable energy, newly appointed secretary of the renewable energy ministry, Anand Kumar, expressed great surprise at the deluge of complaints from developers. Most of them related to state discoms trying to go back on their commitments on wind energy.
He promised to do something about the matter and also told them to keep filing petitions before the appropriate forums. Subsequently, there has been a meeting of state regulators with MNRE officials at which issues raised by developers were discussed with them. Thereafter MNRE has also been in touch with the power secretaries of different states pointing out the problems that have arisen and urging them to get their discoms to behave and honour commitments.
Kumar also wants power purchase agreements to be honoured unless there is an issue of irregularity or corruption.