Andhra power sector facing ‘legacy losses’ of Rs 1.29 lakh cr — new TDP white paper blames YSRCP

Andhra power sector facing ‘legacy losses’ of Rs 1.29 lakh cr — new TDP white paper blames YSRCP

This is the third in the series of white papers that the Telugu Desam Party (TDP) government is releasing to inform the public about “the misadministration and misdeeds of the Yuvajana Sramika Rythu Congress Party (YSRCP) regime”.

Two white papers on the Polavaram irrigation and Amaravati capital projects were previously presented by Naidu. The TDP chief said that another one on the “bad situation” of the state’s finances would be produced soon.

Also Read: Calling Jagan a ‘curse’, Andhra Pradesh CM Naidu releases white paper on stalled Polavaram project

Key highlights

“The losses from 2014 to 2019 include tariff burden on consumers amounting to Rs 32,166 crore, increase in debt of power utilities by Rs 49,496 crore, and losses of Rs 47,741 crore due to inefficient governance,” Naidu said during Tuesday’s presentation.

According to the paper, the total debt burden of state power utilities increased from Rs 62,826 crore to Rs 1,12,422 crore — a surge of Rs 49,596 crore, or 79 percent, in the past five financial years.

While capital expenditure (capex) loans went up from Rs 36,792 crore in FY 2018-19 to Rs 46,380 crore in FY 2023-24, operating expenditure (opex) loans of utilities increased from Rs 26,034 crore to Rs 66,042 crore in same time.

“Timely realisation of outstanding receivables could have assisted AP power utilities in meeting their operating expenses. To manage the cash flows, utilities have resorted to borrowing short-term loans at an average interest rate of 10.11 percent. This is leading to an additional interest burden of around Rs 10,892 crore forcing power utilities to incur huge financial losses,” the paper read.

During the TDP government’s previous term (2014-19), it “managed the finances successfully without any tariff increase/burden on consumers”, the paper claimed, adding that “there have been multiple tariff hikes over the past five years”.

“In addition, indirect tariff hikes through true-up charges, electricity duty and fuel surcharge (FPPCA) were imposed on consumers. The total burden on consumers during the last five years is Rs 32,166 crore, resulting in an overall tariff increase of 21 percent,” TDP’s paper noted.

The average tariff for domestic consumers, the paper said, increased from Rs 3.87 per unit in FY 2019- 20 to Rs 5.63 per unit (45 percent) in FY 2023-24 leading to a burden of Rs 8,180 crore on domestic consumers alone.

Chief Minister Naidu said that the additional burden due to procurement of solar power from Solar Energy Corporation of India (SECI) stood at around Rs 3,850–4,350 crore per year. 

In December 2021, the then Jagan Reddy-led government, Andhra discoms (distribution companies) and SECI had entered a tripartite agreement for procurement of 7,000 megawatt of solar power from SECI at Rs 2.49/unit. This solar capacity was to be connected to the inter-state network and scheduled to be commissioned in phases with 3,000 MW in September 2024, another 3,000 MW in September 2025, and the remaining 1,000 MW in September 2026.

Considering the lowest tariff of Rs 1.99/unit discovered at the time of the agreement, the additional tariff burden on consumers because of the SECI deal amounts to around Rs 850 crore per year, the paper noted.

Though solar projects are exempted from payment of General Network Access (GNA) charges, the state shall be liable to pay these charges for power other than solar hours. Thus, additional burden due to GNA charges is expected to be around Rs 3,000–3,500 crore per year.

General Network Access reportedly provides open access to the central transmission network for all power producers.

Net present value of additional burden for 25 years due to the agreement is around Rs 62,000 crore, according to the document.

It further said that the 55-month delay in commissioning of the Vijayawada Thermal Power Plant (VTPS) Stage-V Unit-8 (800 MW), and the 44-month delay in Krishnapatnam Thermal Power Plant Stage-II Unit-3 (800 MW), under the YSRCP government, caused a total extra burden of Rs 12,818 crore.

Also, additional burden due to delay in commissioning of Polavaram Hydro Electric Project is expected to be around Rs 4,737 crore.

Lack of optimal planning in power procurement and delay in commissioning of new power projects resulted in an increase of short-term power purchases, the TDP document said. Such purchases increased from 3,373 million units (MU) in FY 2019-20 to 11,655 MU in FY 2023-24. Average short-term power cost also increased from Rs 4.02/kWh in FY 2019-20 to Rs 7.61/kWh in FY 2023-24, an increase of around 89 percent.

In the last five years, discoms procured 43,416 MU from power markets and bilateral sources at a higher cost than the approved average variable cost, with an additional cost of Rs 26,030 crore. This led to an additional burden of Rs 12,250 crore on consumers.

Also Read: Naidu’s whitepaper says image of Amaravati, AP suffered under Jagan — ‘Rs 2 lakh cr gain to GSDP lost’

‘PPA cancellations hurt investor confidence’

The document mentioned how in 2019, the Jagan Reddy-led government had filed a memo before state Electricity Regulatory Commission to cancel 21 Power Purchase Agreements (PPAs) with wind power developers, “alarming power producers, investors, policy makers and legal experts”.

The then Minister of State (Independent Charge) for Power and New and Renewable Energy, R.K. Singh, had even written to Jagan, asking him “to honour the PPAs and prevent their cancellation, which could halt investments in the renewable energy sector”.

When the matter went to court, the Andhra Pradesh High Court had directed the discoms to adhere to PPAs and other agreements.

“Despite introducing various policies during the last five years, AP witnessed limited growth in wind and solar capacity additions due to low investor confidence. The renewable capacity addition has increased only by 1,294 MW during the last five years despite low tariffs prevailing in the country,” the TDP white paper read.

It added that halting and cancellation of some APTRANSCO (Transmission Corporation of Andhra Pradesh) contracts in Amaravati has translated to an additional cost of Rs 281 crore now.

It also mentioned that accumulated losses of the discoms increased from Rs 29,147 crore in FY 2018-19 to Rs 34,090 crore in FY 2023-24 “due to lack of integrated power procurement planning resulting in short-term power purchases at higher costs, and non-receipt of subsidy and government department arrears resulting in interest burden on higher working capital loans to meet the gap between receivables and payables”.

The paper also pointed out the “deterioration of integrated rating of AP Discoms resulting in additional interest rate of 1.11 percent leading to additional interest cost of around Rs 2,442 crore in the last five years” on the loans obtained by the power utilities.

The discoms resorted to power cuts in FY 2022-23 due to lack of power procurement planning. “This is due to intentional delay in commissioning of the three — Polavaram, Krishnapatnam and VTPS — stations,” the paper said.

It claimed that all categories of consumers were affected — rural domestic consumers with power cuts of one hour per day during daytime, urban domestic consumers with 30 minutes per day. Up to 12-hour power cuts were faced by continuous process industries, up to 15 hours by non-continuous process industries, up to 12 hours by commercial consumers and two hours for agriculture consumers.

Energy sales rose from 54,555 MU in FY 2018-19 to 69,113 MU in FY 2023- 24, growing at a rate of 4.8 percent, one of the lowest in the country, the paper said.

Per capita electricity consumption of the state increased by only 123 kWh from FY 2018-19 to FY 2022-23, compared to an increase of 146 kWh at national level. “This is mainly due to steep tariff increase and reimposing power cuts due to poor planning which has affected the economic growth (GSDP) of AP,” the document said.

The way forward

CM Naidu said that his government is facing significant challenges in the power sector in terms of addressing the legacy losses of Rs 1,29,503 crore created by the YSRCP government.

“A big challenge is bringing back investors’ confidence and rebuilding Brand Andhra Pradesh. Our primary objective is to provide quality and reliable power at affordable rates to all consumers without any power cuts,” he said.

Naidu added that he intended to take advantage of the technological advancements and rapid transformation in the power sector to address these problems.

Claiming that his Power Sector Reforms 1.0 during 1995-2004, when he was the chief minister of undivided Andhra Pradesh, and Power Sector Reforms 2.0 during 2014-19 — his last term — had made the state energy efficient and sufficient, Naidu said, “We now need Power Sector Reforms 3.0 to transform the sector to empower the society, by making Andhra Pradesh the energy hub of the future.”

(Edited by Mannat Chugh)

Also Read: After friendly meeting, CMs Naidu & Revanth decide to form committees to resolve AP-Telangana issues


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