Andhra Pradesh 10 GW Solar Plan for Obliterating Agriculture Subsidies runs into Problems

The Andhra Pradesh government formed a grandiose plan to set up 10 GW of solar power capacity in the state which would meet the demand load from its agriculture sector almost completely by supplying 9 hours of daytime demand so that the power could be used by farmers for running their pumps for irrigation purposes. The government set up a new company that would identify the land and would bid out the capacity in the form of tenders which would allow private developers to sell power to the government with PPAs to be signed for 25-30 years.

This plan was riddled with many problems. The AP government had already earned notoriety for stopping payments to renewable power developers saying that the contracts had been signed at too high a rate and wanted to reduce this. This going back on signed contracts created a huge controversy with both the central government and the courts getting involved as it created an issue of investment uncertainty into the RE sector for the entire country. The issue remains to be resolved with some major developers fighting the case out in the courts. You can read more about it here.

The second issue is where would the government get the money for paying the developers of the 10 GW plant since the electricity sector in the state is having a problem in paying existing developers. The agriculture sector is getting the power even now, so would not an additional 10 GW constructed in such a short time result in a power surplus situation which would exacerbate the already existing financial issue with the state power utilities. While the concept of the agriculture subsidy of USD 1.39 billion being used to pay off remains interesting in concept, it remains to be seen how the already tied up power capacity under contracts would be paid off by the state which is already reeling under a huge debt burden due to multiple handout schemes

Despite the many challenges the government has already issued a 6.4 GW tender which has received a response from 4-5 large developers such as NTPC, Torrent, and Adani. These developers interestingly have not built large capacities in the state earlier as major RE developers like Renew, Greenko, and Tata having large capacities are already fighting the state to get their just dues. The procurement has already run aground with Tata filing a case in the court saying that this runs against the power laws of the state and the center.