NEW DELHI/VIJAYAWADA: Union Finance Minister Nirmala Sitharaman on Monday assured investors that India will honour contractual commitments made under various energy agreements, especially in the renewable energy sector, and promised to ensure that cancellation of power purchase agreements as is being done in Andhra Pradesh does not happen again.
Speaking at the India Energy Forum in New Delhi, she said, “I also want to broadly highlight the justifiable concerns about honouring contractual commitments....We as a nation are concerned. We will make sure that commitments are honoured. That should not worry those investors or those who already invested in building capacities in India for energy and energy security.”
Referring to the controversy over PPAs in Andhra Pradesh, she said she was conscious of the uncertainties. “Without taking any sides, I can tell you that commitments will be honoured. Therefore Investors need not have that concern,” she asserted.
Recently, the Andhra Pradesh government had asked government nodal agencies Solar Energy Corporation of India (SECI) and NTPC to lower tariff of renewable energy projects auctioned by them under concluded power purchase agreements (PPAs). India has set an ambitious target of 175 GW of renewable energy by 2022.
Elaborating further, Sitharaman said, “the Central government will take every step to make sure that atmosphere to invest is going to be friendlier.”
She promised that the government would not only work to simplify regulatory framework but also make sure that such incidents (as in the case of Andhra Pradesh) do not happen again.
The Andhra Pradesh government, which is facing a financial crisis of sorts, is keen on renegotiating PPAs signed during the erstwhile TDP government, pointing out that some of the agreements were signed unnecessarily and at a great cost, imposing an additional burden on the already burdened Discoms. It has also alleged corruption in the way the PPAs were signed and has made it clear that it wants to bring the tariff down.
Meanwhile, Oil Minister Dharmendra Pradhan, speaking at the Energy Forum in Delhi, appealed to the Finance Minister to bring jet fuel and natural gas under the ambit of the GST to reduce multiplicity of taxes and improve the business climate. When GST was introduced on July 1, 2017 amalgamating over a dozen Central and State levies, five commodities - crude oil, natural gas, petrol, diesel, and aviation turbine fuel (ATF) - were kept out of its purview given the revenue dependence of State governments on this sector.
“It has been two years since the historic tax reform GST was implemented. There has been a continuous demand from the petroleum industry for the inclusion of petroleum products under the GST regime. I make a strong appeal to the Finance Minister to take this up with the GST Council and at least, make a beginning by including natural gas and ATF in the GST.”
Later talking to reporters, Pradhan said he was confident GST Council - the highest decision-making body of the new indirect tax regime - will take a decision on the issue “at an appropriate time.”
Under the existing structure, these items attract the Centre’s excise duty and a State’s value-added tax (VAT). Both these and all other levies will get subsumed under GST if they are brought under its ambit. The decision on their inclusion depends on the financial position of States as revenues from these five petroleum products constitute a substantial chunk of State government finances.
In the case of Andhra, even if only ATF and natural gas are included in GST, the annual loss to its revenues would be approximately Rs 700 crore. Speaking to TNIE, a senior officer pointed out that given the grim situation of the State finances, any such step would be a disaster.
“Initially, we may lose Rs 700 crore to Rs 800 crore if the Centre brings natural gas and ATF under the ambit of GST. We will have to be prepared to lose Rs 11,000 crore-odd in case the Centre brings all petroleum products under GST. So, we must oppose any such move strongly,’’ the official said. Pointing out that the many BJP-ruled States too are opposing the Centre’s views, he said it will not be possible for the Centre as it is impossible to achieve consensus in the GST Council.
