Andhra Pradesh Amends 10 GW Agricultural Solar Program to Mitigate Cash Flow Issues

The amendments changed the tariff model to provide for a levelized tariff structure for 25 years


The Government of Andhra Pradesh (GoAP) has issued amendments to its order for setting up 10 GW of solar projects in the state to provide farmers nine hours of free power a day.

The Government of Andhra Pradesh had issued an order last month with guidelines to implement its 10 GW solar power project program for farmers in the state. The program aims to provide nine hours of free power during the day to farmers without increasing the financial burden on the state’s distribution companies (DISCOMs). The program was originally proposed in February, and approved in June.

In its latest order, Andhra Pradesh changed the tariff model for the program to provide for a levelized tariff structure for 25 years. The previously prescribed model provided for 15 years of the full tariff and only operations and maintenance (O&M) services after that.

The state government said it made this change to mitigate the impact on government cash outflows during the first 15 years. It referenced a solar auction conducted by SECI that had discovered the lowest tariff of ₹2.36 (~$0.03172)/kWh for a 2 GW ISTS-connected solar project, fixed for 25 years. It was noted that this excluded any changes to basic customs duty and safeguard duty that can be passed through the Change in Law clause.

When implemented, these duties would increase the tariff further, and this would result in higher cash flow for the government. A levelized tariff for 15 years with O&M after that would significantly lower the expenses by the government, the government explained.

The previous regulations say that developers need to pay ₹31,000 (~$416.673)/acre per annum for leasing government lands. This also had an escalation of 5% every two years.  Solar developers had to factor this lease amount into the tariffs they quoted. While the state government earns land lease, they end up paying the same through the tariffs quoted by the developers, the amendment noted. Considering this, the state government lowered land lease rentals on government lands to ₹5 (~$0.06721) /acre. The government explained that this nominal rate would result in lower tariffs and lesser cash outflows for the government. The government would be revenue-neutral and not suffer any loss on account of charging nominal lease rent, the amendment added.

The state also issued amendments to clear up the ambiguity regarding the construction of internal evacuation infrastructure. This included the connection of the solar projects to the pooling station as prescribed. The state clarified that the Andhra Pradesh Transmission Company (APTRANSCO) would be in charge of establishing transmission lines from the pooling stations to grid substations or switching stations. This will include all required system strengthening to evacuate power from these projects at their costs, which can be recovered through transmission tariffs determined by the Andhra Pradesh Electricity Regulatory Commission (APERC).

According to Mercom’s India Solar Project Tracker, Andhra Pradesh accounts for 3.7 GW of large-scale solar projects in operations, and approximately 1.3 GW of projects are under the development pipeline as of Q1 2020.

Nithin Thomas is a staff reporter at Mercom India. Previously with Reuters News, he has covered oil, metals and agricultural commodity markets across global markets. He has also covered refinery and pipeline explosions, oil and gas leaks, Atlantic region hurricane developments, and other natural disasters. Nithin holds a Masters Degree in Applied Economics from Christ University, Bangalore and a Bachelor’s Degree in Commerce from Loyola College, Chennai. More articles from Nithin.