‘ PPAs decoded: Just wait for 15 days’, says Principal Advisor to Chief Minister YS Jagan Mohan Reddy

Every government should have a legislature and an executive, be it at the national, State or village level. At the village level, there is no executive.

VIJAYAWADA: Strongly defending the State government’s decision to review renewable Power Purchase Agreements (PPAs), Ajeya Kallam, Principal Advisor to Chief Minister YS Jagan Mohan Reddy, asserts that the government’s intention is only to bring down the burden on the common man, not to gain political or pecuniary benefit.

Giving a point-by-point rebuttal to Union Minister of State for Power RK Singh’s recent missive on PPAs, the former chief secretary tells Kalyan Tholeti and Jayanth P that the companies that quoted higher tariff would soon come forward to supply power at much lesser rates. In the free-wheeling chat, he also predicts that the Village and Ward Secretariat system will lead to a better tomorrow and help realise Gandhiji’s dream of Gram Swaraj

On the Village Secretariat and Volunteers, the major apprehension is that all this may morph into another Janmabhoomi Committee type of scenario. What do you say?

Every government should have a legislature and an executive, be it at the national, State or village level. At the village level, there is no executive. It is only legislature, the panchayat. The state has huge manpower and the Centre has even more. But, villages, where the delivery of initiatives should be done, don’t have any. Mahatma Gandhi wanted Gram Swaraj, which means that a village should run and govern by itself. We didn’t have an executive system back then.

Now, we have a permanent one. These appointees are not temporary ones to associate themselves with a political party. They are permanent government servants. Village Secretariats are as good as State Secretariat. They should look after welfare and development, besides comprehensive planning. Basically, we are strengthening the panchayat system. All the secretariat appointments are anyway done on the basis of merit. It is a local government.



A successful panchayat may probably elect much better people tomorrow and many of them may opt to become a sarpanch instead of an MLA. The influence of State legislature and district administration will slowly come down so that important things would get attention. Regarding the volunteer system, instead of giving Rs 2,000 to Rs 3,000 as dole like the previous government, we thought we could give a substantial amount and use them for social work. This way, we are not only keeping them employed but also giving them an opportunity to learn how the government works.

Citing the recent letter from Union Minister RK Singh, former Chief Minister Chandrababu Naidu has attacked the government, naming you in particular, over the wind and solar PPAs. Your response?

Be it the Power Minister, CM or an administrator, we expect them to have basic knowledge. In 2016, as the Principal Finance Secretary, I had noted my objections on a file related to the takeover of a thermal power station in Srikakulam. It was based on the views of an expert group, appointed by the Niti Aayog in 2015, which forecast that solar and wind power tariff will come down by 17-22 per cent and 6-7 per cent. Subsequently, the then government dropped the idea of the takeover. A man (Naidu) who goes out to different countries and gives presentations on the future of technology, besides claiming to be an early adopter of reforms, signing PPAs at a higher cost and that too, for a long period is funny. When an expert says prices will come down, is it right for a policy-maker to sign a long-term agreement? This is what I objected to in 2016 too. So, the fundamental question is how can one justify such a move.

The justification is that the companies in question need to recover investment for the expenditure incurred in setting up the power plants.

By the time most of the PPAs were signed, the costs had already come down. The competitive bidding guidelines for wind energy were released in 2017. A low tariff of Rs 2.64 per kWh was recorded in wind energy auction by the Solar Energy Corporation of India in October, 2017. The tariff further fell to Rs 2.44 per kWh in the auction held in December, 2017. In AP, agreements were made in 2018 also at higher rates. You (Naidu) already claimed that you were a surplus power state. So, you don’t have the renewable purchase obligation (RPO) also. Then, what was the urgency to sign pacts? We are not here to justify somebody’s investment, especially when we don’t want such investments in the first place.

Power generators too contend that if they reduce tariff, they will incur heavy losses.

What we are spending is public money. It should be spent prudently. We can’t spend without accountability. Whether the company will make profit or loss should not be the concern of a decision-maker who makes decisions in public interest. However, our calculations show that the generators are getting an internal rate of return (IRR) of 21 per cent. In addition to the Rs 4.86 per unit we pay, they also get another Rs 0.50 from the Centre as reimbursement. Besides spending on the purchase, we also have to incur the loss of paying for the back up thermal power (whether used or not). So, if those investments (solar and wind power) don’t come, in what way would a power surplus state, as it was claimed to be, would suffer?

Union Minister RK Singh made another point that if cost escalation in coal-based power generation is taken into account, per-unit cost would go up to Rs 20-22 in 25 years whereas renewable power cost would remain the same at Rs 4.84?

There are two issues here. One, I did not say we won’t ever procure wind or solar power. We will procure when the prices crash and it is convenient for us. Why should the minister presume that we are against wind or solar power? We are not. We are against the PPAs entered into for long-term at higher prices. Today, people are willing to invest in our state without any conditions. People are willing to supply power without any PPA! People are running after us asking for 4,000 acres. They are prepared to pay us Rs 500 crore to Rs 600 crore a year. They say we can take the power if we want, and if we don’t, they have market elsewhere. When we have such opportunities, someone trying to justify the irregularities committed by them is nonsensical.

I am telling you, in the next 15 days, you will see. The same company with whom the previous government entered into an agreement is going to come back with a package, revealing how many hundreds of crores we would be saving. Just wait for 15 days and we will show the public where the earlier government was wrong and what we did. Secondly, the total generation of thermal power in our country as of July, 2019, is 1,95,809 MW, which itself is more than the peak demand of 1,76, 159 MW. We have more capacity than peak demand.

One billion tonnes of coal is required to make the entire capacity operational. We have 600 mn tonnes available today. We are importing the balance. But, if you look at our coal reserves, we have an indicative 150 bn tonnes. As a country, do we keep mum? Don’t we want to exploit these reserves? The day we exploit them, the day when wind and solar are going to be free or nominal commodities, the coal demand would come down and prices would crash. So, I don’t see logic in the minister’s argument.

And when we start storing power, for which technology is being developed, we don’t need to worry about thermal power. These are all happening within the sector. A minister of power or an expert of power should not talk about these issues without taking a holistic picture into account. Yes, what we are doing may hurt somebody as everybody and every state would demand a review. So, the investments, either made with good or bad intentions, would be at the receiving end. We agree. The expert committee had looked at the PPAs and found severe irregularities. They are not a regular competitive bid based agreements. They are many irregularities and hence the review to reduce the burden on people.

There is criticism that the government was hasty in how it went about scrapping the PPAs.

We haven’t scrapped any PPAs. We are only reviewing them. If a review or a discussion is also wrong in a democracy, what can we say? We ourselves are ready to approach the AP Electricity Regulatory Commission for the review and that was the stand we took in the High Court. In fact, APERC had issued a notice for the tariff review in February itself. We are only negotiating and discussing how to bring down costs. Who has to take a decision while signing a PPA? Power utilities.

Discoms have written to the APERC that they want to withdraw certain applications for PPAs in February, 2017 itself. APERC permitted them to withdraw and the policy ended on March 31, 2017. But, why did the then government issue an order forcing the Discoms to resubmit the application for PPAs in July? A good number of companies had given applications on February 15 and said they would supply power by March 31. Is it possible for anybody to set up a plant in 45 days?

Discoms are also burdened by transmission losses and then there is power subsidy. All this amounts to Rs 20,000 crore. What is the long-term plan of the government, apart from reviewing PPAs, to make power utilities profitable?

We have to improve efficiency. Most of the losses are cooked up. In the last five years, for the sake of satisfying the media, the government of India, foreign countries and their groups, they (TDP govt) produced fraudulent data. Such fraudulent data ups GSDP growth, but doesn’t exist in reality. All the data was fudged for self-glory. Basically, losses were also cooked up. Every loss was passed on to agriculture. During bifurcation, AP had less than 40 per cent of the borewells, and Telangana 60 per cent. The burden of subsidy was Rs 2,500 crore. Today, they claim it amounted to Rs 7,000-8,000 crore. Borewells haven’t gone up. How did the subsidy increase?

Do you think the present bureaucracy is too slow? If yes, is that the reason for multiple reshuffles of IAS and IPS officials? How will you ensure delivery when bureaucracy is slow?


Definitely, bureaucracy is not what it used to be. The present standard, quality and uprightness is not what it was 30 years ago. The decline is not overnight but over decades. Today, quality has come down. But a good government will slowly improve their confidence and revitalise them.
A change of government can’t make them active. The biggest problem is we are not only shorthanded but also lack quality people. Transfers happen for various reasons. Some may happen because the officials are slow, but that’s not the only reason.

Source: The New Indian Express