The Andhra Pradesh Electricity Regulatory Commission (APERC) has approved the procurement of 1,162.8 MW of solar power for feeder-level solarization of agricultural feeders under Component C of the PM-KUSUM program.

The approval covers projects proposed by the Andhra Pradesh Southern Power Distribution Company (APSPDCL), the Andhra Pradesh Central Power Distribution Company (APCPDCL), and the Andhra Pradesh Eastern Power Distribution Company (APEPDCL).

While approving the procurement and long-term power purchase agreements, the Commission has set a ceiling tariff of ₹3.09 (~$0.034)/kWh for the power to be procured. It ruled that tariffs above this level will not be permitted, except in cases where developers can demonstrate that a portion of project expenditure was incurred before September 22, 2025, the date from which a lower GST rate on renewable energy equipment became applicable. In such cases, the Commission allowed a proportionate tariff adjustment, subject to certification by a statutory auditor.

Background

The case before APERC arose from proposals submitted by Andhra Pradesh’s three power distribution (DISCOMs) seeking approval for solarization of agricultural feeders.

APSPDCL planned to solarize 167,452 pumps corresponding to 751 MW of solar capacity, including 141 MW in the Kuppam area. APCPDCL proposed 191.5 MW covering 76,602 pumps, while APEPDCL proposed 220.3 MW for 49,533 pumps.

In total, the DISCOMs proposed solarization of 293,587 pumps with 1,162.8 MW of solar capacity. Tariffs were determined through tariff-based competitive bidding at the circle level and subsequently reduced through negotiations with successful bidders, resulting in a weighted-average tariff of ₹3.17 (~$0.035)/kWh.

During the public consultation process, several stakeholders argued that Andhra Pradesh already had surplus power and long-term tie-ups with SECI for 7,000 MW of solar power at significantly lower tariffs, and that additional procurement would increase fixed-cost burdens from backed-down thermal plants.

They also argued that the projected savings from feeder-level solarization were illusory and merely reflected a reduction in government subsidy for agriculture rather than real cost savings for the power system. Allocating cheaper solar power exclusively to agriculture would increase the cost of supply for non-agricultural consumers.

Concerns were also raised about the relatively higher tariffs discovered under PM-KUSUM compared to large-scale solar parks and about the failure of DISCOMs to sufficiently renegotiate tariffs after MNRE relaxed the requirement of using ALMM List II solar cells for tenders floated before a certain cut-off date. Following the reduction of GST on renewable energy devices from 12% to 5%, the stakeholder contended that the benefit of this tax reduction must be passed on to consumers through lower tariffs.

In response, the DISCOMs maintained that feeder-level solar projects are fundamentally different from utility-scale solar parks. They pointed out that PM-KUSUM projects are decentralized, spread across multiple small land parcels, involve higher land acquisition and development costs, and lack economies of scale.

The DISCOMs also stated that mandatory domestic content requirements under Component C significantly increased costs and that Andhra Pradesh’s lower solar irradiation compared to states such as Gujarat and Rajasthan resulted in lower capacity utilization factors and higher tariffs.

They further argued that localized solar generation would reduce transmission losses, help meet distributed renewable energy obligations, and provide a dependable daytime power supply to farmers.

Commission’s Analysis

APERC held that the tariffs determined through competitive bidding and post-bid negotiations were reasonable when viewed in the context of the project’s size, decentralized nature, domestic content requirements, and connection at the 11 kV level.

The Commission rejected direct comparisons with large solar park tariffs, observing that once interstate transmission losses and wheeling charges are accounted for, the effective landed cost of utility-scale solar at the distribution level would be significantly higher.

Referring to a suo motu order issued by the Central Electricity Regulatory Commission, APERC treated the GST reduction as a change in law event requiring benefits to be passed on to consumers. It was estimated that the reduction in effective GST would lower project capital costs by around ₹1.4 million (~$15,519)/MW, translating into a reduction of approximately ₹0.11 (~$0.0012)/kWh in the levelised tariff. On this basis, the Commission set the maximum permissible tariff for feeder-level solar projects at ₹3.09 (~$0.034)/kWh.

APERC acknowledged developers’ claims that increases in module prices and balance-of-system costs had offset GST benefits, but held that regulatory certainty and consumer interest required a clear tariff ceiling. At the same time, it allowed limited relief for expenditure incurred before the GST cut-off date to avoid retrospective financial hardship.

Based on this analysis, the Commission concluded that the procurement of 1,162.8 MW under PM-KUSUM Component C was economically justified, aligned with the state’s long-term power requirements, and beneficial to consumers.

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