HYDERABAD: The union government has advised the YS Jagan Mohan Reddy headed Andhra Pradesh government to desist from the move to revisit the power purchase agreements (PPAs) in the renewable energy sector, viewing that such steps would affect the investor confidence and the country's renewable energy targets.

In a letter to the AP chief secretary LV Subramanyam, the union new and renewable energy secretary Anand Kumar aired serious concerns over the contemplated move of the Andhra government reported in the media.

The union government's letter also comes days after the state government's orders to cancel all the infrastructure contracts awarded before April 1 by the erstwhile government headed by N Chandrababu Naidu, estimated to affect around Rs 50,000 crore worth contracts.

This decision had led to dozens of banks raising concerns over the possibility of mounting non-performing assets (NPAs) involving infrastructure projects in Andhra Pradesh, a decade after similar fate the lenders suffered following the death of the then chief minister YS Rajasekhara Reddy (YSR). Dozens of construction firms that prospered by securing large irrigation contracts during the YSR regime had suffered debacle after his death as subsequent governments either shelved those projects, changed priorities, or inordinately delayed payments.

The new AP chief minister Jagan, son of late YSR, has vowed to review all the PPAs, especially wind and, solar, entered into by the erstwhile government led by N Chandrababu Naidu alleging corrupt practices pertaining to tariffs. Reddy even vowed to review the tenders awarded by the previous government in the irrigation projects.

In a letter to Andhra’s chief secretary on Thursday, the union renewable energy secretary Anand Kumar aired serious concerns over the contemplated move by the Reddy government to revisit PPAs signed with various wind and solar developers. Kumar said “revisiting PPAs shake the confidence of the investors in the sector and adversely affect the future bids and investment in the state and the country.”

The union secretary made it clear that “a contractual agreement once signed should not be revisited unless there is a specific provision to do so in the agreement or a case of conspiracy and undue gains is proved.”

In this context, the union secretary said the government of India had set a target of installing 175GW of renewable energy capacity by 2022, of which 100GW would come from solar, 60GW from wind, 10GW from biomass, and 5GW from small hydro projects.

On its part, AP government during Chandrababu Naidu’s regime increased the renewable energy capacity to 7,463MW in 2018-19 from 1,340MW in 2014-15 and was among the frontrunners in promotion of solar parks by setting up the world’s largest solar power project of 1,000MW at a single location in Kurnool’s ultra-mega solar park. The state was also on its way to achieve the targeted capacity addition of 5,000MW of solar and 4,150MW of wind power by 2020 and achieve 18,000MW renewable energy capacity by 2021-22.

The union renewable energy secretary Anand Kumar said various renewable energy project developers sign PPAs with the state government either under section 62 or 63 of the Electricity Act. The tariff is fixed by the State Electricity Regulatory Commission (SERC) in line with the Central Electricity Regulatory Commission’s guidelines in the first case. In the second case, the tariff is arrived at through a transparent open competitive bidding basis. “In both cases, SERCs conduct public hearings before adopting the tariffs and signing the PPAs,” said Kumar.

“In case any PPAs are revisited without a reason, it would affect the national programme,” said the union renewable energy secretary, while advising the AP chief secretary to apprise their chief minister YS Jagan Mohan Reddy of these facts.

When contacted, the AP chief secretary LV Subramanyam told ET that he received the letter from the union renewable energy ministry. A senior bureaucrat in the chief minister’s office, who didn’t want to be named, said, “However, there is no proposal to reopen PPAs in general.