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IPPs say Punjab move to revoke contracts will hit investments

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Power companies have written to Punjab governor Banwarilal Purohit, saying the state government’s efforts to renege power contracts will jeopardise investments of ₹27,000 crore, which would become bad loans.

If such action is allowed to go through, other states may follow suit, thereby posing a systemic risk to power sector investments- existing and upcoming-including investments in much needed RE space, Association of Power Producers has said.

“India’s recently announced target of 500 GW non-fossil fuel-based capacity by 2030 is expected to require more than ₹15 lakh crore of investment, which is no easy feat to achieve. This move by the government of Punjab threatens to jeopardise and put a question mark on India‘s aspirational push towards clean energy,” it has written to Purohit.

The Punjab Energy Security, Termination of PPAs and Redetermination of Power Tariff Bill, 2021 provides for referring all 63 renewable energy contracts totalling 750 MW and termination of agreements with 1,400 MW Nabha Power owned by Larsen & Toubro and Vedanta’s Talwandi Sabo power plants.

While legal experts have termed the bill as unconstitutional, Fitch Ratings said it could thwart investment flow into the renewable energy sector and result in legal challenges by sponsors.