A batch of solar power projects with a total capacity of 7,670 megawatts (MW) is set to be put out to tender in the next two months where the benchmark tariff will vary according to location. Also, there will be no viability gap funding for bidders, like earlier auctions, to quote lower than the market rate.

For a 3,000 MW project cluster (250MWx12), the maximum tariff payable is set at Rs 2.93 a unit for 25 years. Bidders will have to quote below the benchmark rate. Location of the projects and sale of power will be managed by Solar Energy Corporation of India (SECI), the nodal agency for tendering solar projects.

Another tender for a batch of 2,000 MW solar projects (250x8) as well as the Kadapa Solar Park (750 MW) in Andhra Pradesh and the Pavgada Solar Park (200 MW) in Karnataka will also be offered at the same rate, according to tender documents seen by Business Standard.

The tariff of Rs 2.97 a unit was discovered during bidding for the 750 MW Rewa Solar Park last year.

Uttar Pradesh, which will host 1,650 MW of these projects, consisting of six solar parks of 275 MW each, will have a higher ceiling rate of Rs 3.43 a unit. The same ceiling tariff will apply to a 70MW solar power project in Assam.

Solar power tariffs have been falling constantly and touched a record low of Rs 2.44 a unit last year, before climbing to Rs 2.65-3.36 a unit in an auction in Gujarat. As tariffs fell faster than commissioning older projects, states have been reluctant to purchase costlier renewable power, with some even going back on their purchase agreements.

The government, in order to stabilise rates, had been contemplating a benchmark rate, officials said.

Sector experts, however, said the benchmarking had come at a time when players had become unsure of the cost of solar power. Indian solar panel makers have moved the Directorate General of Safeguards for a duty on solar imports. The DGS has suggested a preliminary duty of 70 per cent. If confirmed, this could increase the cost of solar power to almost Rs 3 a unit.

“More than 80 per cent of the Indian solar industry is dependent on imports. Any duty will lead to price escalation.

The recent notification of the government allowing pass through of such duties is a positive, but that still will increase the cost for the developer,” said a Delhi-based analyst.

In its latest report, rating agency ICRA said the quantification of actual tariff changes would remain critical from the cash flow perspective of the developers affected.

“Moreover, the retrospective applicability of such duty under change in law remains critical for projects which have been recently awarded in bidding route from the viability perspective of such projects,” it said.

Source: http://www.business-standard.com/