The financial bids for the allocation of 100 MW of solar PV projects in Rajasthan were opened on February 11th 2013. A total of 25 bids worth over 200 MW have been received.

• The lowest valid solar bid in India of INR 6.45/kWh was submitted in Rajasthan. This tariff only makes financial sense if the developer makes full use of accelerated depreciation benefits
• The Rajasthan solar policy does not consider separate tariffs for projects that avail accelerated depreciation and projects that do not
• Only the developers backed by Indian companies and with prior businesses in India will stand to avail accelerated depreciation benefits, and are at a clear advantage

Developers could bid for either a 5MW project or a 10MW project. The lowest bid has been submitted at INR 6.45/kWh by Essel Mining and Industries Ltd. This is currently the lowest valid solar bid in India. It has no escalation. (The INR 5.97/kWh bid for a 10 MW project in Tamil Nadu by Mohan Breweries has now been offered a tariff of INR 6.48/kWh with an escalation of 5% per annum for the first 10 years. Effectively providing a tariff of over INR 7/kWh in levelized terms).

According to the project allocation process under the Rajasthan policy, in order to obtain a project, other developers will now be asked to meet this lowest tariff (referred to as L1). Assuming that the current capital cost of setting up a project is at least INR 70m, this tariff could only make financial sense if the developer is making full use of accelerated depreciation benefits. Unlike the National Solar Mission (NSM) and the Gujarat solar policy, the request for proposal (RfP) document for the bidding process in Rajasthan does not consider separate tariffs for projects that avail accelerated depreciation and the projects that do not. For the Rajasthan bids, project development companies that are not backed by an Indian corporate (e.g. Azure Power) as well as international project development companies that do not have prior businesses in India (e.g. SolaireDirect) face a disadvantage in competing for the allocations as they would not be able to avail the accelerated depreciation benefit.

For the Rajasthan bidding process, companies that are backed by Indian businesses with multiple interests such as Essel Mining, Emami Cement, OCL Indian and Jindal Power will stand to benefit as they will be able to make use of such accelerated depreciation benefits. Apart from that, these companies will also be able to avail recourse-based debt finance for the projects. Non-recourse financing in Rajasthan will be extremely difficult given the poor long term payment security for the PPA signing entity, Rajasthan Renewable Energy Corporation Limited.

Jasmeet Khurana works on project performance benchmarking, success factors for module sales, financing and bankability of projects in India.

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