MNRE removes cap on bids for renewables, industry says decision ill-timed

Industry has been asking for removing caps when market conditions favoured higher tariffs; the govt's move comes when tariff has reduced

There will be no tariff cap on renewable energy project auctions, with the government deciding to do away with the upper ceiling — a move it hopes will boost investment in solar and wind power projects.

The Ministry of New and Renewable Energy (MNRE) has issued a directive to Solar Energy Corporation of India (SECI), NTPC and state government departments.

Business Standard has reviewed the notice, which was issued recently.

The move comes after industry requested the government to remove ceiling on the bidding. Several states and SECI have a capped tariff rate, beyond which companies cannot quote while bidding for solar and wind power projects.

The tariff caps ranged from Rs 2.9 per unit by SECI in some solar power tenders in 2019 to Rs 3.5 per unit by some states such as Maharashtra, Rajasthan and Uttar Pradesh. This led to a lot of tenders going undersubscribed or drawing no interest from industry which found the caps to be too low. The prevailing market conditions made the projects unviable for companies, said an executive. The lowest bid in solar and wind has been in range of Rs 2.4 per unit.

Some industry executives, however, called this decision ill-timed. “Industry had been asking for a cap when market conditions favoured higher tariff. Now when the tariff has come down, the government has removed the cap — killing two birds with one stone,” said a senior executive of a leading renewable company.

In a recent tender floated by SECI for 1,200 Mw of solar power plants, the tariff discovered was Rs 2.5 per unit, the lowest in past two years. Industry executives said comparatively relaxed norms in the tender was the reason for low tariff.

In the same notice, MNRE also directed SECI, NTPC and the state power departments to procure renewable energy either through single renewable source or various combinations of renewable sources with or without storage as per their procurement policies.