CPSU Program for 12 GW of Solar Amended, VGF Capped at ₹5.5 Million
Solar projects must be commissioned within 30 months from the date of LoA
May 11, 2021
The Ministry of New and Renewable Energy (MNRE) has issued amendments for setting up 12 GW of solar projects with viability gap funding (VGF) by central public sector undertakings (CPSUs) for self-use or use by government entities.
The total cost of the projects under this program is estimated to be ₹480 billion (~$6.33 billion).
As per an earlier amendment, the Indian Renewable Energy Development Agency (IREDA) was made the implementing agency on behalf of the MNRE, including conducting the bidding through the VGF route.
Earlier this year, IREDA had floated a tender to set up 5 GW of grid-connected solar projects in India (Tranche III) under the CPSU program (Phase II). IREDA had capped the tariff under this tender at ₹2.20 (~$0.030)/kWh. Following the announcement, Telecommunications Consultants India Limited (TCIL) issued an expression of interest to select partners for setting up solar projects under the program.
According to Mercom’s India Solar Tender Tracker, a total of 3.5 GW of solar tenders have been issued under the CPSU program.
The VGF is provided to cover the difference between the domestically produced solar cells and modules and those that are imported. As per the new amendment, the maximum permissible VGF has been kept at ₹5.5 million (~$74,990)/MW, and the actual VGF will be decided through bidding. Earlier, the sum was ₹7 million (~$92,288)/MW.
As per the latest amendment, the power produced by the government entities can be used for self-use or use by government entities either directly or through distribution companies at the mutually agreed rate of ₹2.45 (~$0.033)/kWh. The rate would include all the charges, including wheeling and transmission charges, point of connection charges and losses, and cross-subsidy charges. Earlier, as per the existing clauses, the rate was fixed at ₹2.80 (~$0.037)/kWh.
The amendment further states that solar projects under this program will be commissioned within 30 months from the letter of award (LoA). The earlier time frame was 24 months from the date of LoA for projects up to 500 MW.
However, for projects over 500 MW, capacity up to 500 MW must be commissioned within 24 months from the date of LoA, and the remaining capacity must be commissioned within the next six months, MNRE has clarified.
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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.