MERC approves MSEDCL To Procure At Rs 3.05 For 111 MW Solar projects under MSKVY

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In an order issued last week, the Maharashtra Electricity Regulatory Commission (MERC) gave its approval to Maharashtra State Electricity Distribution Company Limited for starting the procurement process of 111 MW of grid connected Solar power projects under the ‘Mukhyamantri Saur Krishi Vahini Yojana’ (MSKVY). The order covers a total of 33 respondent firms who had bid collectively for 111 MW of solar power under the scheme.

The order granted the go-ahead for a long-term business prospects allowing the MSEDCL to enter into Power Purchase Agreements with the successful bidders for a period of 25 years. The Commission also clarified that the Solar Power procured from these projects shall be eligible towards fulfilment of MSEDCL’s Solar RPO for the respective periods.

The order came in response to a petition that was filed by MSEDCL in October 2021 seeking approval from the Commission for adoption of tariff for a long term procurement of 111 MW Power under the ‘Mukhyamantri Saur Krishi Vahini Yojana (MSKVY)’ for 2 MW to 10 MW Capacity Projects connected to Distribution Network.

Further, MSEDCL had sought approval to the RfS and PPA document floated for 1300 MW tender under the MSKVY.

The Commission in its earlier order dated December 18, 2020 had accorded its approval to proceed with continuous bidding process for selection of bidder at ceiling tariff of Rs. 3.30 per unit under MSKVY. However, in the meantime, tariff of Rs. 2.36 per unit was discovered in SECI tendered projects located in Rajasthan. Therefore, MSEDCL decided to float tenders for solar power under decentralised solar project with a revised ceiling rate of Rs. 3.05 per unit with cumulative capacity of 1300 MW.

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In keeping with the prevalent market conditions and MNRE guidelines of decentralized solar plants dated December 13, 2019, MSEDCL floated district wise 30 tenders on April 22, 2021 for procurement of solar power through competitive bidding. The same was intimated by MSEDCL to the Commission in its letter on May 11, 2021, before the last date of submission of bid on June 11, 2021.

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The financial bids of 33 bidders finally selected were opened on July 6, 2021. The MSEDCL pleaded to the Commission for adoption of tariff for above 111 MW solar power discovered through competitive bidding process. In a e-hearing on the matter in November this year, the common issue of disruption in supply of solar equipment manufacturing from China and increase in GST rate were cited by all bidding companies (selected by MSEDCL bidding process) as the reason for the higher bid.

As a matter of fact, the Ministry of Finance on September 30, 2021 had increased the GST on import of Solar Modules and Solar Inverter from 5% to 12% (“MoF Notification”). This obviously came after the last date of the bid submission on June 11, 2021. This was pointed out as as a ‘Change in Law’ event.

In refusing to entertain the plea of the respondents to consider the increase in prices and the GST change as a Force Majeure and ‘Change in law’ event respectively, the MERC has gone with MSEDCL’s argument that those issues can be considered only after the signing of the PPA. And the contention that actual orders will be placed only after financial closure that will follow the PPA signing, Thus, that decision can be deferred till respondents reach that stage, by which time the market situation might well change again.