GUVNL Revokes Subsidy to 4,000 Solar Projects of Around 2500 MWs

A wholly-owned state electricity regulation board in the state of Gujarat, Gujarat Ujrja Vikas Nigam Ltd. (GUVNL) has withdrawn subsidies to small-scale distributed solar projects, hitting about 4,000 projects with an aggregate capacity of around 2500 MW contracted capacity.

The purchase price of power produced was fixed at Rs 2.83 per unit which was already far lower than other states like Rajasthan and Maharashtra, where they set Power Purchase Agreements (PPA) tariff rates at higher than Rs 3.15.

Those projects were part of the scheme that was intended to support Prime Minister Narendra Modi’s ambitious renewable energy goals. The ‘Policy for Development of Small Scale Distributed Solar Power Projects’ was first announced in March 2019, by the government to encourage the distributed generation of solar energy.

As consequence, distribution generation to Gujarat state power companies was expected to help reduce transmission losses, farmers would get electricity during the day, the environment would benefit and the Center and the State governments would benefit from GST revenue.

MSME investors have approximately invested Rs 100 crores for registration with DISCOM/GEDA to DISCOMs PGVCL, UGVCL, DGVCL, MGVCL through advanced charges for transmission line supervision and connectivity, so far. Developers have also invested a total of Rs 1,000 crore and a proposal to invest Rs 10,000 crore has been received.

According to the policy, any eligible developer can set up a solar power plant with a capacity ranging from 0.5 MW to 4.0 MW and supply the solar power produced to the nearest GETCO substation.

Although, the Gujarat government is now uncertain about providing the promised subsidies. It has also discouraged investor sentiments who are now looking to switch to states that assure higher returns. And, this will effectually refute the state’s effort in incentivizing and building a green state.

Industry body, Associated Chambers of Commerce & Industry of India (ASSOCHAM), and other solar associations and companies have also pointed out that these solar power projects will employ more than 30,000 people for 25 years. And withdrawing subsidies won’t help the state growing its renewables.

The GUVNL move is not as surprising as it seems, considering the past record of the state, when decisions have been taken to delay central schemes. But like rooftop solar, its clear that smaller solar schemes are a difficult challenge for discoms to manage, or perhaps, easier to  mangle.