Jagan moves HC against Centre over Letters of Credit to power producers
Chief minister Jagan Mohan Reddy has already incurred the wrath of the Centre for its decision to review the power purchase agreements (PPAs) with the solar and wind power producers.Updated: Oct 16, 2019 00:34 IST
Escalating the confrontation with the Centre, the Andhra Pradesh government on Tuesday moved the state high court challenging the latest orders of the Union power ministry to open Letters of Credit (LCs) for purchase of power from wind and solar power producers in order to ensure timely payments to them.
A lunch motion petition was filed by power distribution companies of Andhra Pradesh in the high court stating that it is not possible to issue LCs to the solar and wind power producers in the wake of financial crisis in the Discoms.
The high court kept the Union energy ministry’s orders in abeyance for a period of three weeks and posted the case to November 5 for the next hearing.
An official familiar with the development said the Union ministry of new and renewable energy last week issued directions to Andhra Pradesh, through Power System Operation Corporation Limited (PSOCO), asking the Discoms to issue Letters of Credit to wind and solar power generators for the quantum of power supplied to them.
If the Discoms are not able to pay the money to these companies for the power supplied by them within 45 days, they would encash these LCs with the banks. “The Union ministry set October 15 (Tuesday) as the deadline for issuance of LCs to the solar and wind power producers. If the Discoms failed to issue LCs before the deadline, they would lose the right to transact power from national power exchange and get short-term open access,” the official said.
Challenging these directions in the high court, the Discoms argued that opening of LCs was waived by the power companies while signing the PPAs. “The Central government as a third party cannot interfere in the contract conditions of PPA. It has no judicial power to put a few Discoms out of the power exchange and short term open access that are governed by the Central Electricity Regulatory Commission (CERC),” they argued.
The action of the Central government amounts to rewriting the terms of the PPA between Discoms and the power producers, the Discoms pointed out.
The official said if the Union power ministry bars the Andhra Discoms from purchasing power from the national power exchange, the power supply position in the state will be in crisis, as there is already a shortage of power from thermal power plants.
“At the same time, the Discoms are not in a position to issue LCs to solar and wind power producers due to their high tariff,” he said.
Chief minister Jagan Mohan Reddy has already incurred the wrath of the Centre for its decision to review the PPAs with the solar and wind power producers. Union energy minister R K Singh wrote a series of letters to the Jagan government to withdraw its move to review PPAs, as it would affect the investment flow in the energy sector.
The high court recently ordered that the issue be settled before the AP Electricity Regulatory Commission, instead of the state doing a unilateral review of the PPAs.
Last week, state energy minister Balineni Srinivas Reddy wrote a letter to the Union energy ministry requesting that the Centre constitute a committee to resolve the power-purchase related issues as it is incurring a financial burden on the state.