Ceiling Tariff of ₹3.10/kWh Set for Small Solar Projects Under KUSUM Program

Uttar Pradesh Power Corporation and Renewable Energy Development Agency had sought approval for deviations from MNRE guidelines


The Uttar Pradesh Electricity Regulatory Commission (UPERC) has approved several deviations in the request for selection (RfS) and power purchase agreement (PPA) for procurement of power from the small capacity (0.5 MW to 2 MW) grid-connected solar photovoltaic power projects under ‘Component-A’ of Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) program.

Under component A of the program, the government aims to set up 10 GW of decentralized, ground-mounted, grid-connected solar projects of individual project size of up to 2 MW.

The Commission heard a petition filed by Uttar Pradesh New & Renewable Energy Development Agency (UPNEDA) and Uttar Pradesh Power Corporation (UPPCL). They had sought approval of deviations from the guidelines issued by the Ministry of New and Renewable Energy (MNRE) along with the approval of bid documents (RfS and PPA).

Some of the deviations approved include the approval of ceiling tariff of ₹3.1 (~$0.043)/kWh to allow maximum participation for the discovery of competitive bid price; disallowing bidders with solar projects less than 0.5 MW; and approval of the submission of bid security declaration instead of earnest money deposit for tenders under the PM-KUSUM scheme.


On December 31, 2019, the Uttar Pradesh government issued an order to implement Component- A under the PM-KUSUM program.

UPNEDA and UPPCL proposed to invite bids for 160 MW capacity (30% of the substation capacity to be considered as a spare capacity available for injection at the substation). UPPCL also provided a tariff cap of ₹3.10 (~$0.043)/kWh. They filed a petition seeking approval of deviations from the standard bidding document issued by MNRE in the RfS and PPA documents.

Subsequently, the MNRE issued the following amendments on November 13, 2020:

  • Solar installations can be on pastoral land or marshland owned by farmers.
  • Solar projects smaller than 500 kW to support small farmers
  • Selected renewable power generators must commission the project within 12 months from the issuance of Letter of Award (LoA).
  • No penalty is levied on such generators for generating less power from the minimum prescribed capacity utilization factor (CUF).

On December 7, 2020, the MNRE issued further directions, which stated that bid security declaration would be obtained for tenders under the PM-KUSUM program instead of EMD.


After considering the deviations suggested, the Commission approved the ceiling tariff of ₹3.10 (~$0.043)/kWh to allow maximum participation to discover competitive bids.

The petitioners had proposed that the land lease should be a bipartite agreement between farmers and the developers, and the distribution company (DISCOM) should not be held responsible for failing to get the land leased. The petitioner sought a deviation under which the developer paid the lease rent directly to the farmer.

However, the Commission was not inclined to approve the deviation citing that the onus of payment to small farmers must not be left to private developers.

The petitioners also sought to disallow bidders with solar projects less than 500 kW capacity since it was difficult for DISCOMs to manage smaller projects. The Commission approved the request.

Since the MNRE had already approved the submission of bid security declaration instead of EMD for tenders held under PM-KUSUM, the question of deviation did not arise.

Similarly, since the MNRE had deleted guidelines about the penalty on minimum CUF declared by the solar power generator, the Commission considered no deviation in this regard.

The Commission also approved the mentioning of details about grid connectivity which, according to the petitioners, were not mentioned earlier.

The Commission approved the petitioners’ plea for an increase in late payment surcharge’s applicability from 30 days to 60 days and an extension of time to claim a rebate by DISCOMs on payments from seven days to ten days.

In Madhya Pradesh, the regulator has set a pre-fixed levelized tariff of ₹3.07 (~$0.042)/kWh under Component A of the KUSUM program. In Jharkhand, a pre-fixed levelized tariff of ₹3.09 (~$0.042)/kWh is approved for these projects and in Telangana, a levelized tariff of ₹3.13 (~$0.043)/kWh has been set by the regulator.

Rahul is a staff reporter at Mercom India. Before entering the world of renewables, Rahul was head of the Gujarat bureau for The Quint. He has also worked for DNA Ahmedabad and Ahmedabad Mirror. Hailing from a banking and finance background, Rahul has also worked for JP Morgan Chase and State Bank of India. More articles from Rahul Nair.