Amaravati: The Andhra Pradesh government has clarified that it would review all the power agreements which were done over the last five years. The chief advisor to AP government, Ajay Kallam remarked that the underlying mission is to bring the power sector back on track.
Power Purchase Agreements made over the last five years imposed a huge burden on the state economy. Andhra Pradesh has had to shell out an additional amount of Rs 2500 crores for the purchase of Solar and Wind energy at higher rates. This was done though conventional energy in the form of thermal and hydel power was available. The AP government has therefore decided to review all Power Purchase Agreements to protect the interests of the people of the state.
In addition to Ajay Kallam, others who addressed the media were special principal secretary to the Chief Minister, PV Ramesh and Secretary Power, N Srikanth.
Speaking to the media, Ajay Kallam said: "One can gauge how Dr YSR handled the power sector from the fact that he introduced the free power in the undivided state, which continues to be in force in both the Telugu states. Such a well managed power sector tragically went off the rails and a huge burden was imposed on the state treasury. Our objective is to clean up the system and to bring the power sector back on track. Chief Minister YS Jagan Mohan Reddy is committed to root out corruption in order to reform the power sector. The CM firmly believes that transparency in the system would benefit the people of the state. It is with this objective in mind that the power agreements are being reviewed."
Ajay Kallam condemned the propaganda that investment would be impacted if Power Purchase Agreements were to be reviewed. He pointed out that the Chief Minister was committed to protecting the interests of the state and ensuring the state treasury is not put to loss through such agreements rooted in corruption. He questioned the motive behind such malicious propaganda on the review of PPAs.
When asked about a letter written by the energy department of the union government, Ajay Kallam refused to comment on the subject. He said that the government would respond to the letter and place the facts before the Centre.
The Chief advisor to the government also placed before the media certain facts mentioned in the 2018-19 Economic Survey brought out by the Centre. The Centre's report had stated that there was a significant drop in the rates of wind and solar power. Kallam elaborated that the Centre's economic survey revealed that the per unit price of Solar power dropped from Rs 18 in 2010 to Rs 2.44 in 2018. He also disclosed to the media representatives that there was a significant reduction in wind power rates.
Ajay Kallam further told the media that the Centre through its Economic Survey had itself stated that by 2017, the per unit cost came down from Rs 4.20 to Rs 2.43. When compared to prevailing rates of the time, the previous state government had made agreements at a much higher cost, he pointed out. The Chief advisor to the state government revealed that the previous government had decided to purchase 3000 megawatts of wind power at a cost of Rs 4.84 per unit.
He further stated that if the long term agreements with Genco and other entities for hydel power were to be factored, the per unit cost would go up to Rs 6. He questioned the need for purchasing wind power at such high cost without even calling for tenders. When the prevailing wind power rates had dropped to Rs 2.43 per unit, where was the need to go in for power agreements at such a high cost, he asked.
He also wondered why there was a need to buy surplus power at exorbitant rates when the power supply from thermal and hydro sources was adequate for the state's requirements.
Countering the propaganda of investments getting impacted by the current government's review of PPAs, he revealed that investors we're ready to set up plants for the supply of 5000 MWs at a per unit cost of Rs 2.70 without PPA.
Ajay Kallam said that the Power Engineers' Federation referred to the Centre reducing the power tariff in the case of companies such as Adani power, ESSAR Power and Tata Power even after the bidding process has been completed. The Federation had demanded similar action from states across the country. Ajay Kallam further clarified that companies which had not violated any norms or indulged in irregularities had nothing to worry.
The Chief advisor to the government stated that 70% of the power agreements had been made only with five companies and it would be better if they extended their cooperation to the government failing which the state government would decide on further course of action after reviewing the PPAs.
Ajay Kallam spelt out to the media in detail how the tendering process has been scrapped last year when there was a difference of only Rs 27 paise between L1 and L2. He said that it came to light that a company had resorted to irregularities and therefore the tendering process for 2400 megawatts out of the 3000 megawatts that the tendering was called for by the solar energy corporation was suspended.
He further revealed that when the same organisation set up a plant for the production of 350 megawatts in Kurnool, the government went in for an agreement at Rs 4.63 per unit. The secretary of the energy department elaborated on the power situation in the state to the media. He revealed that by March 31,2019 the losses in the sector had been mounted to Rs 15000 crores and that banks refused to offer loans to discoms.
He also pointed out that power supply firms owed an amount of Rs 18,375 crores to power production companies. The official further stated that the state government owed NTPC Rs 5000 crores which had to be paid immediately and if this was not done by September, the state would further be burdened by a loss of Rs 450 crores.
He added that the expenditure has risen sharply because of suspending utilisation of power which were a part of long term 25-year agreements made for thermal power under renewable power sources. On account of this decision, a fixed per unit rate of Rs 1.10 for NTPC and Rs 1.25 for Genco had to be paid as decided by the Centre's tariff. Whether the state utilises the power or not, it had to honour these agreements, he revealed.
The senior official further pointed out that while APERC had set the limit for renewable energy at 5%, the current status stood at 23.6%. Neither industries nor the people of the state were ready for an additional burden in this respect, he pointed out. While the number of PPAs in undivided AP was 88, the residuary state went in for 133 PPAs. The estimated cost of long term 25-year PPAs was Rs 39,200 crores.
Of the 133 PPAs made by the previous government, 70% were given to five companies. Six agreements were given to Greenko for the purchase of 999 megawatts. 17 more PPAs were given to renew for 717 megawatts capacity. Seven PPAs were made with Mytrah for 352 megawatts. Four PPAs were made with the Union government's Power Trading Corporation for 189 megawatts, Ekoran corporation for 151 megawatts, Axis energy for 210 megawatts, he further stated. In this manner 70% of the power was being purchased through five companies, the senior official further stated.