Gu­jarat May Scrap Auc­tion Over High Win­ning Tar­iffs

The Economic Times - - Economy: Macro, Micro & More - Kaavya.Chan­[email protected] times­group.com

Bengaluru: Win­ning tar­iffs by Soft­bankbacked SB Een­ergy, Fin­land’s For­tum and French util­ity Engie in the lat­est so­lar auc­tion in Gu­jarat are much higher than ex­pected, prompt­ing the state to con­sider whether the auc­tion should be can­celled, of­fi­cials said.

The 700 MW auc­tion held in De­cem­ber was won en­tirely by for­eign de­vel­op­ers. SB En­ergy got 250 MW at a price of .₹ 2.84 per unit, while For­tum and Engie got 250 MW and 200 MW, re­spec­tively, both at .₹ 2.89 per unit.

In the pre­vi­ous auc­tion held by the Gu­jarat Urja Vikas Nigam Ltd (GUVNL) in Septem­ber 2018, the low­est tar­iff had been .₹ 2.44 per unit, and the Gu­jarat gov­ern­ment is un­happy over the sub­stan­tial rise within three months. “We may not agree with the tar­iff. It seems to be on the higher side,” said a se­nior state gov­ern­ment of­fi­cial in­volved in the mat­ter. “A de­ci­sion will soon be taken. We are look­ing at op­tions. We were ex­pect­ing a much lower rate.” GUVNL had ear­lier can­celled a 500 MW so­lar auc­tion it held in March in which the low­est tar­iff was .₹ 2.98 per unit.

Some ex­perts said the tar­iff in­crease in the De­cem­ber auc­tion could be at­trib­uted to the con­di­tion set by GUVNL that the so­lar projects should be lo­cated at a so­lar park in the state, un­like in the Septem­ber auc­tion, whose projects could be lo­cated any­where. So­lar park charges are gen­er­ally high. Other in- dus­try sources felt higher costs of cap­i­tal and cur­rency volatil­ity (much of the so­lar equip­ment used is im­ported) had been fac­tored into the De­cem­ber tar­iffs, thereby rais­ing them.

In con­trast to the Gu­jarat gov­ern­ment, they felt the rise in tar­iffs was an en­cour­ag­ing sign, show­ing bids were be­com­ing more re­al­is­tic. Both de­vel­op­ers and bankers had been wor­ried about the de­clin­ing trend in tar­iffs ear­lier in the year, and feared that in their zeal to grab projects at auc­tions, some de­vel­op­ers were mak­ing bids that were plain un­vi­able.

The win­ning de­vel­op­ers in the De­cem­ber auc­tion have not yet re­ceived the Let­ter of Award, which is usu­ally is­sued with a week after the auc­tion. A GUVNL of­fi­cial said ap­proval of the tar­iff from the state en­ergy min­istry was still awaited. The of­fi­cial would not com­ment on whether the auc­tion would be can­celled or not.

The en­thu­si­as­tic re­sponse of for­eign com­pa­nies was at­trib­uted to GUVNL’s rep­u­ta­tion as hav­ing the best fi­nan­cials among all state dis­coms in the coun­try. “If the auc­tion gets can­celled, the move could send wrong sig­nals to the for­eign in­vestor com­mu­nity,” said a de­vel­oper. “We are go­ing ahead in de­vel­op­ing the Dholera site where we pro­pose to in­stall about 5000MW of so­lar power,” the Gu­jarat gov­ern­ment of­fi­cial said.

The 700 MW auc­tion held in De­cem­ber was won en­tirely by for­eign de­vel­op­ers

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