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Solar mission delicately poised in India; needs more props

According to reports, the ambitious Jawaharlal Nehru National Solar Mission – a programme that is keenly watched by the world – is delicately poised at the moment. There are some issues and the future of the project depends on how they are sorted out.

First of all, there should have been an announcement from the nodal agency – NTPC Vidyut Vyapar Nigam Ltd – as to how many of the 30-odd solar PV and the seven solar thermal projects have cleared financial closure and are going ahead with commissioning, under Batch-I of phase-I of the 22 GW Solar Mission. The Batch-I projects would create 620 MW of solar power capacity, and kickoff the programme.

That such a chest-thumping announcement has not happened yet is very telling. Scratch the surface, questions come worming out, but no answers. These seem to fall broadly under two heads: Have the developers achieved financial closure and has there been a change in shareholding structure. Under the tender conditions, the first is mandated, the second is prohibited.

NVVN officials have told Business Line that if a developer says he has not achieved financial closure, but put up the project out of his own pocket, there is no way he could be denied the project, and his bid bond forfeited. But this stance is fraught with problems. Another company that has not participated in the bidding could now say, “if I had known this, I’d have participated in the tender too.” What would the NVVN tell that firm?

Now, it is strange that a developer who gets bank funding should be asked to provide proof, but one who says he could do it by himself is not asked to clarify how.

The second issue – of change in shareholding between the time of bidding and now – is similarly disconcerting. A senior official of NVVN told Business Line that the matter is now under examination from a legal perspective. Should there be a violation of tender conditions, a notice would be issued to the offender, at which shall begin a 60 day ‘consultative period’. During this period, the developer would either convince NVVN that he is not in violation or he would revert to the original shareholding structure.

But what if he found to be in violation and does not revert to original structure? Would the project be cancelled? And, during the consultative period, could he go ahead with project construction?

For sure, as NVVN officials point out, we don’t know yet, even if there is any violation of tender conditions. But remember, the documents were submitted on July 24. “If things were okay, they would have announced something by now,” notes Mr Vijay Lakhanpal, COO, Forum for Advancement of Solar Thermal (FAST).

While the technicality of shareholding would delay the project, the absence of funding would derail it. Any delay begs the question whether the prescribed deadlines would be relaxed. It is not clear as to how many projects have financing in place – the industry buzz is, not many. Would they be able to execute the projects out of their balance-sheets? Surely, not the big-ticket thermal projects? And, thermal projects add up to 470 MW.

In this haze, the visibility is too poor to come up with a reasonable estimate of how many projects will reach fruition. Even if only, say, 200-250 MW come up it ought to be held a good start, but this overhand of confusion needs to be cleared fast, especially because the bidding process for the Batch-II, which would complete the 1,000 MW phase-I, is about to begin soon.

To be fair, the whole solar business is very new in India. You never know when the next step might land on a mine. Those who are in charge of shepherding this phase of the Solar Mission ought to be given fair latitude, any mistakes pardoned. But the authorities need to bring things back in control very quickly, say industry experts.

Tariffs for batch 2

What would really help the developers planning to bid for batch 2 is if the MNRE declared the tariffs of the projects that achieved financial closure and those that have submitted resolutions for equity financing of project, says Mr Vineeth Vijayaraghavan, an industry observer who runs the online newsletter,

This will also help clear the belief among industry observers that only projects with unviable tariffs that otherwise would have to be cancelled, have given these equity financing letters, in order to buy time to find strategic partners or buyers, Mr Vijayaraghavan says.

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