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Cabinet clears phase two of solar mission

2 Comments
Date:Oct 4, 2013

Lack of clarity on domestic content and procedural hitches delayed the launch by over six months

State-of-the-art manufacturing unit of Indian solar manufacturing company, Indosolar, under forced closure. Indian manufacturers bled profusely because of solar mission phase one policy which allowed import of thinfilm technology from abroad and mandated domestic content only for crystalline silicon technology. Phase 2 mission has set this problem right (Courtesy: Indosolar)

The Union Cabinet cleared phase two of the Jawaharlal Nehru National Solar Mission (JNNSM) on October 3. The Union Ministry of New and Renewable Energy (MNRE), which is responsible for executing the mission, is expected to float tenders inviting bids for 750 MW of solar photovoltaic power under batch one of the phase two shortly.
 
“We will float the tenders very soon as the mission is already delayed. We also have to do it before the imposition of model code of conduct for Assembly elections, which is expected anytime soon in some states like Rajasthan and Delhi,” said Tarun Kapoor, joint secretary with MNRE. The project developers would get 45 days from the date of floating of tenders to respond. The second phase of the mission was to begin in April this year but there were many things that delayed its launch; this included lack of clarity over domestic content (sourcing equipment from domestic market) and procedural delays. The first phase of JNNSM ended in March 2013.
 
MNRE released the policy guidelines for 750 MW of solar photovoltaic power under phase two in April this year. Under JNNSM, the ministry aims to install 20,000 MW of grid-connected solar power by 2022. The second phase has a target of 9,000 MW grid-connected and 800 MW off-grid solar power by 2017. In the first phase of JNNSM with a target of 1,000MW, only 500 MW has been connected to the grid so far because most of the Concentrated Solar Power projects could not be commissioned in time (see ‘Sun block’).

The power tariff for projects under phase two has been fixed as Rs 5.45 per unit. The project developers can avail capital subsidy in the form of Viability Gap Funding (VGF) to finance their projects so that they can sell electricity at the fixed price of Rs 5.45 per unit. Bidding will take place for VGF and the developers who quote lowest VGF subsidy get the project. Using VGF route to finance solar power projects was severely criticised by non-profits.
     
Domestic content to be 50 per cent and technology neutral 
 
The Cabinet has cleared the proposal of MNRE that 50 per cent of the projects in phase two would have domestic content. This phase of JNNSM would also be technology neutral. It means, both the PV technologies—crystalline silicon and thinfilms—will be treated at par. MNRE had a bad experience in the first phase which mandated that projects using crystalline silicon photovoltaic (PV) technology should source equipments domestically. On the other hand, projects using thinfilm PV technology were allowed to source equipment from anywhere in the world. This resulted in an average of 60 per cent of projects using thinfilm technology from abroad. This led to domestic industry bleeding profusely (see ‘Sunshine sector looses sheen’).
 
 

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Regarding Domestic Content Requirement (DCR):

More clarity in VGF guidelines required, on the DCR requirements................. if 50% requirement is technology neutral?

In other words does it specify 50 percent of whatever type of cells or modules used whether crystalline or thin film? Confusion prevails about TF (cells & modules).

Thanks,
Yogesh Birla
Director
Birla Wealth & Project Management Co.
(Solar Project Div.)
Jodhpur (Rajasthan) INDIA

8 October 2013
Posted by
YOGESH BIRLA

How practical is this VGF scheme..... a big question………….???

It does not play a major role in cash inflow calculation, since 50% VGF shall be released on commissioning of full capacity, and remaining shall be released as 10% at every year end, from 1st year to 6th year………so PV of the amount realised at 6th year end is very low, (discounted from bank rate in India).

Further, it is not certain to get 30% subsidy, if companies quote lesser to get projects, it may reach to as low as 10% only. So considering PV value of money realised at more than one year interval, does not affect cash inflow in larger extent.

Further, tariff shall be fixed for 25 years @ Rs. 5.45 (without AD), again in concept of inflation in India, what shall be value of Rs. 5.45 per unit, after 25 years………. Most of the longer tenure infrastructure projects, power projects are inbuilt with Escalation clause to safeguard / hedge from inflation and decreasing value of rupee.

CA Yogesh Birla
Director
Birla Wealth & Project Management Co.
(Solar Project Div.)

8 October 2013
Posted by
YOGESH BIRLA

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