Will Jagan's cordial ties with Modi end sooner than expected?

Soon after the YSR Congress Party supremo Y S Jagan Mohan Reddy stormed to power in the April 11 Assembly elections in Andhra Pradesh, it was widely believed that he would forge a friendly equation with the BJP leadership at the Centre.

The tone and tenor of his election campaign had indicated that he would make a common cause with the saffron party and would even extend support to the NDA if it fell short of numbers.

After taking over the reins of the state, the young leader dropped enough hints about his “non-confrontational” approach towards the Centre.

The honeymoon period between the YSRCP and the BJP was expected to continue till their common enemy, Telugu Desam Party (TDP), is decimated in the state. It is no secret that the BJP is keen on making inroads into Andhra Pradesh by using Jagan’s shoulders to fire at the TDP and then occupy the opposition space before the next Assembly polls.

Moreover, Jagan cannot afford to antagonise the BJP leadership with the illegal assets case still hanging over his head.

However, two latest developments point towards the possible end to the honeymoon period sooner than expected. First, the Centre has taken a strong objection to the state government’s decision to review Power Purchase Agreements (PPAs) made during the previous TDP regime with solar and wind power producers.

In a letter addressed to the Chief Minister, the Union Minister of State for Power and Renewable Energy R K Singh warned that revisiting the PPAs would halt the flow of foreign investments into the sector, which holds key to meet environmental and power needs of the country.

In another development, the NDA 2.0 has firmly ruled out granting Special Category Status for Andhra Pradesh, saying the matter has become infructuous in the wake of the 14th Finance Commission’s report ending such categorisation. The assertion, made on the floor of the Lok Sabha recently, comes in the backdrop of Jagan vowing to take up the demand with “renewed vigour.”

“I will continue to demand the special status like a nagging child till the Modi government concedes it,” the Chief Minister had said recently.

Now that the demand of the nagging child has been summarily rejected, it remains to be seen whether he will stop nagging or start throwing tantrums at the Centre. The YSRCP supremo’s political survival will now largely depend on how deftly he manages this contradiction in the days ahead. It was precisely on this issue that his predecessor N Chandrababu Naidu had severed ties with the BJP and walked out of the NDA in March last year.

Contentious PPAs

On June 26, while reviewing the performance of the power sector in the state, Jagan took a dramatic decision to constitute a five-member cabinet sub-committee to probe into the alleged corruption involved in the signing of PPAs by the previous government.

The allegation is that the TDP government had purchased solar and wind power at exorbitant rates from select companies, ignoring the cheaper rates quoted by others in competitive bidding.

“The Naidu government had made excess payments to the tune of ₹2,636 crore to these producers of solar and wind power, causing huge loss to the state exchequer,” Jagan alleged and ordered that the energy department recover excess payments made to the power companies.

He also wanted legal action to be initiated against the top officials of the energy department responsible for the deals. The sub-committee will now re-negotiate with the solar and wind power producing companies and cancel the PPAs, if the companies did not fall in line.

Interestingly, the Union minister virtually ruled out irregularities in signing the PPAs and attached documents pertaining to bidding by the power producers. He pointed out that the tariffs were fixed by the Central Electricity Regulatory Commission at the national level and the State Electricity Regulatory Commission in respective states.

“Power purchase agreements are contracts binding on all signatories. If the contracts are not honoured, the investments will stop coming. For the above reasons, it will be wrong and against the law to cancel all the PPAs,” he wrote to the Chief Minister.

Only if there was prima facie evidence of corruption in the signing of any PPA, the state could order a probe and take action, Singh pointed out.

“There should be concrete evidence of malpractice in a particular case. Otherwise, the PPA cannot be cancelled,” the Minister said.

The Centre’s assertion on the PPAs may not go down well with the new regime in the state which is keen on “unearthing the corrupt practices of the past.” This may well turn into a flashpoint.

Last month, Union Energy Secretary Anand Kumar also wrote a similar letter to the State Chief Secretary L V Subrahmanyam, asking him to prevail upon the Chief Minister to withdraw the move to cancel the PPAs. He said that the Centre had set a goal to achieve 175 Gigawatts (GW) of renewable energy by 2022. Revisiting the PPAs would affect the flow of investments, he warned.

Hobson’s choice

On the special status issue, Jagan has a Hobson’s choice. Having made it one of the key campaign themes, he cannot simply abandon it midway nor can he afford a climb down on such an emotive issue. He had often accused Chandrababu Naidu of having failed to achieve the special status for AP despite being part of the NDA government in the past.

Accepting a special package by the Centre, in lieu of the special status, will also amount to diluting his party’s stand on the issue. Jagan needs to reconcile to the harsh reality of an unresponsive central government as far as his demand for on special status is concerned.

Confrontation with the Centre is certainly not an option for the Chief Minister as he has inherited messy finances and needs generous help from the union government to fund the ongoing projects as mentioned in the Andhra Pradesh Reorganisation Act.