Solar auctions in Maharashtra and Karnataka aren’t shining — here’s why

Representative image

Recent solar auctions in Maharashtra and Karnataka received fewer bids than previous year.

Low response rate led to repeated postponements. Maharashtra’s latest 1,000 MW solar auction was postponed for the fourth time as it received bids of only 530 MW. The bid was announced by the Maharashtra State Electricity Distribution Co Ltd (MSEDCL) in December last year.

Also read — Government plans to amend solar power bidding norms

Similarly, Karnataka’s 1,200 MW auction for projects at the Pavagada Solar Park drew only two bids of just 550 MW in the second attempt. The Karnataka Renewable Energy Development Ltd (KREDL) has set March 2 as the second deadline; however, the response rate has been low.

Here's why these solar auctions are not shining in India —

> Imported solar equipment

Nearly 90 percent of the solar equipment in India is imported, and developers prefer these equipment as they are 25-30 percent cheaper. This has been a concern for the local solar equipment manufacturers.

The government move in January to impose 70 percent provisional safeguard duty on imported solar panels and modules from China and Malaysia put at risk nearly 3,000-MW or Rs 12,000 crore worth of solar projects under implementation.

Also read — 70% duty may cripple 3-gw solar projects worth Rs 12K crore: Crisil

Since 4,000-MW of solar projects were auctioned at low tariffs in 2017, any rise in equipment cost after the 70 percent safeguard duty would crimp the cushion that developers have to service debt, rating agency Crisil had said.

> Anti-dumping duty on imports

The Directorate of Anti Dumping and Allied Duties (DGAD) has been separately considering another petition from local manufacturers seeking imposition of anti-dumping duty on imports.

Initially, developers refrained from bidding in either of the auctions as their bid documents did not include a crucial clause relating to ‘change of law’, stating the winning tariff would be renegotiated if any rules relating to the solar segment changed. This would mean that the winning bidder may have to comply to the imposition of either safeguard duty or anti-dumping duty.

Also read — Govt to introduce stricter quality norms for solar equipment, BIS mark could be made mandatory for sale

“Maharashtra has still not agreed to absorb the duties, which is why developers are reluctant to bid,” said Vinay Rustagi, managing director of solar consultancy Bridge to India told Economic Times. 

Karnataka's second bid saw few takers, despite the exclusion of ‘change of law’ provision. “Just that single safety net clause is not enough,” an industry insider told the paper.

> Maximum tariff for bids

In case of Karnataka, KREDL has set the maximum tariff for the auction, beyond which, the body refused to consider any bids.

“The ceiling tariff of Rs 2.93 per unit which KREDL has set is too low,” Rustagi told the paper, adding that Karnataka has comparatively low solar radiation and charges at the Pavagada Solar Park are fairly high.

Also read — Solar installations in India likely to fall 22% in 2018

Solar power tariff dropped further to hit a new low of Rs 2.44 per unit in the auction conducted for Bhadla solar park in May 2017. "In another auction for Bhadla Solar Park 3, solar power tariff touched record low of Rs 2.44 per unit," a senior official had told PTI. 

This low tarriff, however, is not viable for Karnataka developers as  Rajasthan’s solar radiation is much higher, Rustagi added.