The Andhra Pradesh government's decision to review power purchase agreements signed by the previous regime is a "recipe for disaster" and will hurt the state's prospect to attract investment, former chief minister N Chandrababu Naidu said Saturday.
The YSR Congress Party-led Andhra Pradesh government has decided to review power purchase agreements (PPA) worth over Rs 30,000 crore signed by the previous government and the industry is in a fix about investment made already in the state. The review has triggered a rating cut for power projects.
"Review of power PPAs by the incumbent government in AP is a recipe for disaster. It will hurt the industry. It will hurt the state's prospects to attract investments," Naidu, former chief minister and the chief of Telugu Desam Party, tweeted.
Besides, it will hurt India's image as an investment destination, he added.
Recently, Sterlite Power Group CEO Pratik Agarwal had said, "Re-negotiating contracts is a big no from investment point of view. If one state does like this .. would affect the credit worthiness of the entire sector."
The government should do everything in its power to ensure this does not happen. "Because ultimately it is a contract with the government not with a particular party. And the government should honour the contracts," he had said.
Association of Power Producers Ashok Khurana had said about Rs 30,000 crore worth investment have been made in Andhra Pradesh.
"It is not question of money and megawatt, it is question of the entire sector and infra space. It sends a wrong message to bankers, investors and developers that the contracts sanctity is not there and can be changed unilaterally. That is bad message you are sending when you looking for foreign investments," he had said.
In such a situation, investors will think twice before making investments because every state is undergoing a election process, he said.
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