According to this report, Tejpreet Chopra, former chief executive of GE India and Rahul Sankhe, business development director of SunEdison Energy India Private Ltd, criticised certain aspects of the Jawaharlal Nehru National Solar Mission that ambitiously targets 20,000 MW of solar energy in India by 2022 in three phases.
Entrepreneurs slam national solar power policy
Speaking on the sidelines of the TiE Entrepreneurial Summit’s ‘Clean is Green’ theme, Tejpreet Chopra — who quit GE India recently to start his own company Bharat Light and Power — told rediff.com that there is a possibility of JNNSM going the telecom policy way if the government does not address certain regulatory issues.
“If they don’t fix it,” said Chopra when asked if the JNNSM will go the same way as the telecom policy on 2G spectrum allocation that led to an estimated loss of Rs 176,000 crore (Rs 1.76 trillion) according to the report of the Comptroller and Auditor General of India.
“Certain clauses on the land acquisition policy have led to many middle men getting in and making money on trading licenses,” Chopra added.
As Panchabuta understands, Mr. Tejpreet Chopra and his company Bharat Light and Power does not seem to have bid for the projects under the Jawaharlal Nehru National Solar Mission nor have participated in any of the discussions or clarifications that have been conducted by NTPC Vidyut Vyapar Nigam (NVVN) when comments were called for and clarifications offered. It is unclear what regulatory issues and clauses that the above mentioned individual is referring to. Further, as Panchabuta understands the bidding has been conducted through a fair and transparent reverse bidding process with stringent bid bond conditions and strict timelines and penalities for potential developers. Also, with such high discounts it seems highly unlikely that these project licenses could be significantly traded.
Addressing a gathering of solar energy entrepreneurs, Rahul Sankhe said that regulations like only one solar plant of 5 MW capacity per producer will not help India reach a target of 20,000 MW by 2022 as envisaged in the JNNSM.
He also said that the policy provides no long-term visibility to producers like SunEdison.
The ministry has very clearly stated that the 5MW capacity in the first batch of the first phase of the mission is to enable maximum participation from numerous bidders and that there is no indication that this the norm for future rounds of the mission. Hence how this could affect the target of 20GW after the third phase of the mission is also unclear. Further, as readers of Panchabuta might already know, SunEdision has bid for a project under the first phase and won the same with a discount of about 551-553 paisa.
The concern about the long term visibility is genuine and MNRE has often repeated that they would be flexible yet adopt a policy only after they have some feedback on the first phase of the National Solar Mission and incorporate the learning of the same to come up with a policy for the second phase.
They hence anticipate this to happen closer to the end of the Eleventh plan period. It is pertinent to note that both these approaches do have their relative merits and demerits and it is in national interest and long term success that they be balanced.
According to Vinod Kala, managing director of Emergent Ventures, who chaired the discussion government’s ambitious target of producing 20,000 MW of solar energy by 2022 would require an estimated investment of $90 billion.
“The biggest gap in the policy is that there is no long-term visibility (in the policy) for developers like us,” Sankhe said.
Both Chopra and Sankhe lamented the fact that banks were not forthcoming to finance such solar energy producers. Sankhe said that the cost of production of 5 MW of solar power ranges between Rs 70-80 crore (Rs 700-800 million).
“The fact that the direct taxes policy (that will come into effect in the next financial year) takes away all the tax benefits (from solar power projects) is another disincentive for the producers,” Chopra said.
The funding by the banks that they talk about is definitely a concern and as Panchabuta understands it seems like certain institutions like IDBI and IFCI are now taking the lead along with IFC and even considering forming a consortium to fund Solar Projects.
Pointing out at yet another regulatory disincentive that mandates that low-cost bidding Chopra said “the low cost bidding policy will kill the industry before it takes off.”
Sankhe also opined the same. “The focus is purely on cost. What matters is the cost of every unit produced,” he said.
Sankhe said that India has great potential to achieve the targeted production of solar power by 2022. “We have so much of sun that only 5 per cent of Thar Desert could produce as much solar energy as the country is producing today.”
He predicted that in the next three to four years the cost of solar cells will drop by 50 per cent because of huge demand for clean source of energy and improvement in process engineering.
Given the way the global situation is playing out and a number of countries either rolling back on feed in tariffs or cutting subsidies, the reverse bidding of the solar mission projects and the low tariffs can definitely not so easily be considered as killing the industry before it takes off as the above mentioned seems to suggest. In fact all the developers shortlisted have already signed their power purchase agreements with NTPC-NVVN including Sun Edison.