APGenco PPAs scrapping will help Telangana, Andhra Pradesh

Hyderabad: The cancellation of APGenco PPAs will be beneficial for both the new states although Telangana might face a loss for the first two years, say experts.

It will also save both states a lot of administrative hassle and fuel wastage in the long run, according to officials from both the sides. However, the issue has become very complex with too many agencies involved and no hope of PPAs ending anytime soon as they are embroiled in a hot political debate.

Meanwhile, Telangana stands to lose financially as well, as the power from the Andhra Pradesh plants VTPS and RTPS is very costly. “If the PPAs are continued, Telangana will be shelling out an additional Rs 2,400 crore to Rs 2,500 crore each year for the 2,000 million units of energy that it gets from Seemandhra as power from AP plants costs Rs 7 to Rs 8 per unit. If the power is brought from the open market, it will cost only Rs 5.4 per unit in the southern region or Rs 3.4 per unit in the northern region. The only issue will be that for the first two years it might not be possible for Telangana to get enough power due to corridor constraints. After two years when the corridor is open, Telangana can get power at much cheaper rates from the northern part of the country which has a power surplus,” said K. Raghu, Co-ordinator, Telangana Employees JAC.

Officials feel that continuing PPAs in the long term will not be workable. About half of the APGenco PPAs will be ending in 2019 while the other half will be ending in 2030 which means that if the PPAs are not cancelled, it might hit growth on both sides. If the PPAs remain, both sides might start thinking of why invest 30 per cent of equity and block public money for the entire lifespan of the plant to share 44 and 56 per cent of the energy with the other state.

This will lead to a major slowdown of growth on both sides. Also if PPAs continue all plants will become interstate plants and therefore for all issues both sides will have to go to the CERC (Central Electricity Regulatory Commission).