A Week Later, No Relenting In Tamil Nadu Decision To Add ‘Resource Charge’ On Wind Energy

The Tamil Nadu government , which imposed a Rs 50 lakh ‘resource charge’ for every MW of upcoming ISTS connected wind energy installations in the state, seems unwilling to relent on the decision. The state, one of the most well placed to generate wind power in the country with an installed capacity of 10.7 GW, the second highest in the country, has taken industry by surprise with its decision. the government has cited the need to conserve the resource for ‘internal use’ citing its renewable purchase obligations. The state has an existing base of 1700 MW of wind energy linked to central projects, a number it expects to rise to 5000 MW by 2030. Thus looking at raking in Rs 16f0 crores from the resource charge through TNGECL.

The notification from TNGECL said it will collect “𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒 𝑐ℎ𝑎𝑟𝑔𝑒𝑠 𝑜𝑓 𝑅𝑠.50 𝐿𝑎𝑘ℎ𝑠/𝑀𝑊 𝑓𝑜𝑟 𝑎𝑙𝑙 𝑡ℎ𝑒 𝑝𝑒𝑛𝑑𝑖𝑛𝑔 𝑎𝑝𝑝𝑙𝑖𝑐𝑎𝑡𝑖𝑜𝑛𝑠 𝑓𝑜𝑟 𝑤ℎ𝑖𝑐ℎ 𝑖𝑛 𝑝𝑟𝑖𝑛𝑐𝑖𝑝𝑙𝑒 𝑎𝑝𝑝𝑟𝑜𝑣𝑎𝑙 𝑖𝑠 𝑦𝑒𝑡 𝑡𝑜 𝑏𝑒 𝑖𝑠𝑠𝑢𝑒𝑑 𝑖𝑛 𝑟𝑒𝑠𝑝𝑒𝑐𝑡 𝑜𝑓 𝐶𝑇𝑈 𝑐𝑜𝑛𝑛𝑒𝑐𝑡𝑒𝑑 𝑝𝑟𝑜𝑗𝑒𝑐𝑡𝑠.” The charges are also applicable for projects where  “𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 𝑐𝑙𝑒𝑎𝑟𝑎𝑛𝑐𝑒 𝑎𝑝𝑝𝑟𝑜𝑣𝑎𝑙 𝑖𝑠 𝑦𝑒𝑡 𝑡𝑜 𝑏𝑒 𝑖𝑠𝑠𝑢𝑒𝑑 𝑖𝑛 𝑟𝑒𝑠𝑝𝑒𝑐𝑡 𝑜𝑓 𝐶𝑇𝑈 𝑐𝑜𝑛𝑛𝑒𝑐𝑡𝑒𝑑 𝑝𝑟𝑜𝑗𝑒𝑐𝑡𝑠.”

Parag Sharma, President of WIPPA, is on record as saying, “This will add to the cost of electricity significantly, and will not be in the interest of country’s green energy targets. Additionally, it will set a wrong precedent for the industry — it may lead to a race among states to collect such levies thereby adversely impacting their own discoms in the long run.”

Tamil Nadu has likely been emboldened by the recent Supreme Court judgement allowing states to levy charges on mineral extraction, considering how it has been considered expressly illegal for states to add any tax on electricity generation, be it Hydro, Thermal or renewable. Himachal Pradesh for instance has been facing strong resistance to its efforts to levy a charge on Hydropower generation in the state. It remains to be seen when the resource charge will be challenged, not if.

In India, recent wind tenders have seen bids in the Rs 3.40 to Rs 3.70 range, which might move up by 20 paise or more if the new charges are taken into account in case of turbines sited at Tamil Nadu. This is based on an assumed wind capex of Rs 7.25 – 8 crore per MW, according to industry people.

The TN move, follows as it does similar efforts by Rajasthan to impose a solar cess or even Madhya Pradesh with its Harit Urja fee of 10paise /kW has triggered demands by industry players for a roll back, and even a stronger effort to subsume electricity generation within the GST regime to avoid such attempts by states.