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Setback for Jagan: HC stays review order on PPAs

In a major setback to the Y.S. Jaganmohan Reddy-led government, the Andhra Pradesh High Court stayed the operation of an order constituting a high-level negotiation committee for renegotiating the power purchase agreements with wind and solar developers.
 
Justice M. Ganga Rao stayed the order issued on July 1st for four weeks on a batch of petitions filed by about 40 wind and solar power generating companies. The judge directed the state government to file its counter and posted the case to August 22nd for further hearing.
 
It may be recalled that the Reddy government took a decision to review all the power purchase agreements (PPA) signed by the previous Chandrababu Naidu regime with wind and solar power generators and constituted a high-level committee to renegotiate the prices. 
 
The Centre wrote at least two letters to the state government, asking it not to go ahead with such review as it would adversely affect investments into the power sector. Ignoring the Centre's advice, the Reddy government was going ahead with the review exercise, saying the PPAs caused a loss of about Rs. 5,000 crore to the state exchequer. 
 
In this backdrop, the private power producers moved the high court seeking scrapping of GO 63. They also challenged the letters sent by the AP Southern Power Distribution Company Limited, threatening to cancel the PPAs if the prices were not cut.
 
Presenting the arguments on behalf of the petitioners, senior advocate Mukul Rohatgi pointed out that the power producers bagged the contracts based on competitive bidding.
 
Relevant agreements were signed only upon the AP Electricity Regulatory Commission’s approval (of the tariffs), he noted. The state government's stand on the issue was “objectionable,” he said. 
 
The court, while noting that the PPAs came under the ERC’s jurisdiction, asked why the government had to issue warning letters (to the power producers). "Could not the issue be amicably resolved at the ERC?" it asked. It also questioned the legality of GO 63.
 
Presenting the government's version, Advocate General Sriram Subrahmanyam contended that cancellation of PPAs was within the government's purview. He said the state was competent to intervene as electricity was in the Concurrent List.
 
The show-cause notice issued by the power distribution companies, threatening cancellation (of PPAs) if the power producers did not agree for negotiation, was only meant to seek revision of the PPA terms in accordance with the Electricity Act.
 
The Advocate General said the state government intended to move the APERC in that regard and the present High-Level Negotiation Committee was only to find if a consensus could be arrived at.
 
The AG maintained that there was "no threat or coercion" on the issue. The judge, however, observed that he found the negotiating procedure to be outside the jurisdiction of the government under the Electricity Act and there should be no haste in these matters.
 

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