Andhra govt’s successful solar initiative offsets free power supply to farmers


The Andhra Pradesh government, which has developed 6,400 MW solar power plants, has procured close to 14,000 million units of solar power per annum at a tariff of Rs 2.48 per kWh, which is much lower than the tariff at which AP Distribution Utilities are procuring power. This has offset the free power given to the farm sector.

The YSRCP government had issued tenders for the development of 6,400 MW solar power plant with an aim to reduce the subsidy burden resulting from the supply of uninterrupted free power to farmers across the state. “The process has resulted in the government securing close to 14,000 million units of power per annum at a tariff of 2.48 per kWh, which is significantly lower than the tariff at which AP Distribution Utilities are procuring power,” an official said.

Chief Minister YS Jagan Mohan Reddy said that the supply of free power to farmers is of paramount importance. However, this entails a huge subsidy burden on the state government. The state is having to incur close to Rs. 10,000 crores as a subsidy to meet the revenue gap of power distribution utilities. The key ingredient of the subsidy component is the power purchase cost, which as on date, is prohibitively high. Another element contributing to the huge power purchase cost is the burden of the PPAs executed by the previous TDP Government at exorbitant tariffs. The average power procurement cost of the state as of now, is close to Rs. 5.2 per kWh.

Therefore, the present government has formulated the approach to procure power from a 6,400 MW solar power projects to be set up in the state. This would ensure reliable daytime power to the farmers and also reduce the subsidy burden on the government due, thereby making the functioning of the sector, sustainable. This low tariff of Rs. 2.48 would result in savings of nearly Rs. 3,800 crores in the very first year and it is likely to increase over the coming years, considering the fact the present tariff of 2.48 for the energy from the 6,400 MW solar power project would remain constant over the next 30 years, whereas the cost associated with power from some of the other sources is likely to go up. The present value of benefit accruing to the state exchequer over the life of this project can conservatively be estimated at Rs. 50,000 crores. Further, the plant was conceived on BOT basis and would, therefore, be transferred to the state after the expiry of the PPA. At the time of transfer, the plant would be operating at 18% CUF, ensuring plentiful supply of power at very low cost.

The bid received for development of the project in CS Puram is higher at Rs. 2.58 per kWh and the committee is examining whether such a high-priced bid should be accepted. Tenders have been filed by big players such as NTPC Adani group and Torrent power to develop the project. The first phase, which stretches over 10 different locations, has attracted a total of 24 bids in all.


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