Allocations under batch one of phase two of the National Solar Mission (NSM) were supposed to begin in May 2013. However, there has been a significant delay in the process and these allocations have not yet been announced. Officials from the Ministry of New and Renewable Energy (MNRE) have been quoted as saying that the documents for phase two of the NSM are now with the union cabinet for approval (refer).

• NSM expected to be kept on further hold due to the looming elections
• The capital subsidy scheme is also on a hold creating a void for state governments looking at rooftop solar policies that are tied to central subsidy scheme
• The investors are increasingly losing patience with the flagship policy of the Indian solar market

The NSM has primarily been held up due to India’s fiscal deficit and the resultant focus on reducing government spending. Apart from that, the MNRE also wanted to wait for more clarity on the domestic content requirement (DCR) case that the US has registered against India at the WTO and the ongoing investigations on anti-dumping duties within India.

The union cabinet may keep the NSM further on hold due to the looming elections. Some market participants expect that the NSM may only be announced after the general elections, to be held by May 2014.

The capital subsidy scheme for smaller projects under phase two of the NSM is also stuck in the same process. This creates an awkward void for state governments looking at rooftop solar policies that are tied to the central subsidy scheme (Uttarakhand has already announced its policy (refer), Gujarat’s policy for 40 MW of rooftop systems to be released soon (refer), Andhra Pradesh is working on a similar policy). All these policies depend on the central subsidy scheme and then provide incentives over and above that. With no clarity on the timelines for phase two of the NSM, the effective implementation of these state policies comes into question.

The state solar policies of Tamil Nadu, Andhra Pradesh, Uttar Pradesh, Punjab, Rajasthan and Karnataka have helped keep the market moving for a greater part of this year. However, many Indian and international developers have not participated in these allocation due to the high PPA risk perception and have been waiting for the announcement of the bids under the NSM. These investors are increasingly losing patience with the flagship policy of the Indian solar market. It is of great importance that the government more actively communicates with the market and provides regular information on the status and timelines of the NSM.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

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