When Chief Minister Y S Jagan Mohan Reddy assumed office promising to shake up the ‘system’, it was widely felt that here was a leader who actually means what he says.
A couple of months on, however, his actions have given rise to anxious enquiries from diplomats, industry captains and even his well-wishers about what he wants to achieve.
It is not that Jagan hasn’t lived up to expectations. Despite financial constraints, he has pushed through a please-all budget.
Though Finance Minister Buggana Rajendranath was tight-lipped on how he will pool the resources, the impression given was that the government will pull out all the stops to achieve it, including extracting over Rs 60,000 crore from the Centre.
The government has also passed a number of bills in the ongoing Assembly session which benefit BCs, SCs, STs, minorities and women.
But, this is being overshadowed by the revolutionary zeal on display. More than anything else, two issues have landed the government in hot water.
One, the decision to review wind and solar power purchase agreements (PPAs); and two, enacting legislation that forces all industries to provide 75 per cent quota in jobs for locals.
The PPA controversy is snowballing with the Centre advising caution and renewable energy companies dragging the government to court.
Jagan is convinced TDP chief N Chandrababu Naidu had minted money by striking deals with wind and solar power companies.
He has constituted a panel to renegotiate PPAs and directed that 21 renewable energy agreements in the pipeline be scrapped.
His argument is that power was purchased over and above the renewable power purchase obligations at a higher rate causing Rs 2,363 crore loss to the state annually.
There is some merit in his arguments. Why were PPAs inked for 25 years when wind and solar power tariff had been dropping over the years?
The Andhra Pradesh Electricity Regulatory Commission (APERC) earlier this year wrote to the government asking it to take legal opinion on this.
Nonetheless, the way the government has gone about it shows it either disregarded legal opinion or did not get proper advice.
The High Court, in its interim order staying the GO constituting the panel on PPAs, termed the government action illegal.
How did the government miss the fact that it is the APERC which fixes tariff?
Besides, the government did not seem to have thought through the repercussions.
AP has 7,700 MW solar and wind projects and the plan is to increase it to 18,000 MW by 2022 in keeping with the Centre’s goal of installing 175 GW of renewable energy capacity in India by that year.
The renewable energy sector attracts sizeable FDI. As per the consulting firm Bridge to India, this financial year, $1.02 billion investment has been made in renewable energy.
Jagan’s actions will deter foreign investors and affected companies are already worried.
According to CRISIL, they may face Rs 21,000 crore debt risk and are in danger of defaulting on half that amount if Andhra doesn’t pay up.
The 75 per cent quota for locals is a poll promise, but rushing the bill through without taking industry into confidence has set the cat among the pigeons.
The demand has been voiced in several states, too, most recently in Madhya Pradesh. But, for a state that is in serious need of investments to generate jobs, the Act is self-defeating in nature.
It puts the onus of training the locals as much on the industry as on the government.
Which businessman would want additional burden when he can recruit skilled workforce from anywhere in other states? Isn’t it in violation of Articles 14 and 16?
The definition of a local is also arbitrary – Jagan insists a local is simply a resident of the area where the industry is located. The rules of the legislation are yet to be formulated to get clarity.
Finally, a one size fits all approach to all industries is inherently flawed.
This quota is difficult to enforce and if insisted upon, it will keep investors at bay. Jagan, the businessman, and Jagan, the Chief Minister, should find a middle ground.