After much hype, central allocations to take a back seat for a while

Over the past several months, we had the impression that central government-led allocations would be the preference of the new government and that the role of the states would be limited to setting up the infrastructure of solar parks and procuring solar power. The central government would make that power cheaper for the state utilities either through bundling it with coal power or through Viability Gap Funding (VGF). This perception is now changing as the central government-led allocations lose steam due to delays in setting up the solar parks and a lack of funds for VGF.

  • The document for implementation of 15 GW by 2019 has been released on March 9, 2015
  •  As nothing concrete has been proposed so far, BRIDGE TO INDIA does not expect new allocations based on such a mechanism any time soon
  • Several states namely Telegana, Karnataka, Tamil Nadu, Maharashtra and Gujarat has announced their plans with respect to implementation

A revised document for the implementation of 15 GW by 2019 (refer) has been released today (9th March 2015). Initially 3 GW planned were to be allocated by March 2015 under the bundling mechanism. Now only 1 GW will be auctioned in Andhra Pradesh in time. The remaining 2 GW is delayed as the solar parks have not been finalized. The document also states that for the remaining 12 GW, the MNRE will devise a suitable mechanism with “minimum support from the government” and “after getting some experience while implementing Tranche I”. The document goes on to explain that this minimum government support could be “in the form of low cost, long tenure loans or other means”.

From the language of the document, we think that the full 3 GW of capacity could be allocated only by the end of 2015 as against the previous timeline of March 2015. With respect to the recently published guidelines for an allocation of 2 GW (from the remaining 12 GW) under the VGF scheme (refer), the process is only expected to move forward once some form of interest rate subvention mechanism has been devised. As nothing concrete has been proposed so far, BRIDGE TO INDIA does not expect new allocations based on such a mechanism any time soon.

The good news is that while the center stalls, several states are moving forward with their own plans. And rightly so: states should not hold their breath for central solar policies that provide only “minimum support”. Here are some recent announcements: Telangana is calling for bids to allocate 1 GW of solar (refer), Tamil Nadu wants to allocate 3 GW (refer), Karnataka will likely allocate 500 MW this year under its existing policy and Maharashtra and Gujarat are expected to launch new policies. While these state announcements will have their own set of issues with respects to implementation, we note that the targets at the state level will likely match, if not exceed, the 15 GW target of the central government until 2019.

All this has to be viewed in isolation of the larger 100 GW target until 2022. There still isn’t any official framework for achieving that. Going by the lower than expected budgetary allocations to the MNRE, BRIDGE TO INDIA does not expect big leaps in this next financial year.

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