Andhra Pradesh issues first payments after standoff

Generators in Andhra Pradesh are finally receiving some of the payments for power from their wind projects after months of deadlock with the local government.

Andhra Pradesh withheld payments from operating projects during the standoff (pic: Mytrah Energy)
Andhra Pradesh withheld payments from operating projects during the standoff (pic: Mytrah Energy)

The Andhra Pradesh government's decision to renegotiate rates for commissioned projects last summer sent shockwaves through the wind industry, already reeling over record-low prices and structural change.

The government had become disillusioned with paying higher feed-in tariff rates to operating projects after prices in local and federal tenders saw prices for wind capacity plummet in India.

Payments to generators were being withheld as the government sought to renegotiate power contracts, while wind and solar generation was purposefully curtailed to halt further payments.

Despite repeated requests and directives from India's federal government, the state was playing hard ball, resulting in an increasingly confrontational situation.

However, after intensive discussions late last year, with the federal government offering concessional loans to the state and waiving interstate transmission charges, the state government's stand appears to be softening.

Over the past two weeks, it started releasing payments that had been due from September 2018 to June 2019, amounting to INR 25 billion ($352 million).

However, the payment was made on a calculated tariff of INR 2.43/kWh ($0.034/kWh) rather than the INR 4.8/kWh ($0.068/kWh) feed-in-tariff at which the wind projects were contracted.

The reduction in tariff was in accordance with court guidelines, which directed payments at the lowest tariff returned in the tenders until the matter is resolved by the state's regulator.

The payments have given some breathing space to the wind power generators. However, they are expecting a favourable outcome from the hearing and hoping for complete recovery of the dues on the contracted tariffs.

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