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Guj’s ‘Solar Capital’ Image May Take A Hit Over Subsidy Denial

Guj’s ‘Solar Capital’ Image May Take A Hit Over Subsidy Denial


State Finance Department Less Willing To Give Subsidy To Solar Power Producers, Leaving 4,000 MSME Units In Limbo And Jeopardising Investment Of Rs 1,000 Cr Already Made And Rs 10,000 Cr Proposed.

After years of projecting Gujarat as the ‘solar capital’ of the country and stirring up investors into pouring hundreds of crores into the ‘once in a lifetime’ investment opportunity, the state government seems to be pouring cold water over its own solar energy initiative.

The government, particularly the finance department, is becoming shaky about providing subsidies to power producers, virtually sounding the death knell for umpteen solar power units.

The other worry the producers have expressed is the low purchase price of solar power fixed by the government — well below the rates in neighbouring states.

At the receiving end of the dithering over subsidy are 4,000-odd small scale power projects with an aggregate capacity of 2500 MW which had signed agreements. Now, they are in a limbo as the government is not ready to give them the promised subsidy.

These units considered MSMEs are entitled to capital and interest subsidy under the Gujarat industrial policy.

Not delivering on promise?

The government’s intent to encourage solar power production on PPP basis and the benefits for producers and investors were clearly laid out from the start – it was never a red herring or grey area that could have led to misunderstandings down the road.

When first announced by the government in March 2019, the ‘Policy for Development of Small Scale Distributed Solar Power Projects’ was clearly aimed at promoting the distributed generation of solar energy in order to save transmission and wheeling losses of DISCOMs.

When applications were invited in October 2020, the government received more than 15,000 of them, promising power production of approximately 8000 MW. Of these, 4,000 applicants signed agreements with the government by May 2021.

As stated in the policy, any eligible entity can set up a solar power plant with capacity ranging from 0.5 MW to 4.0 MW, and supply the solar power produced to the nearest GETCO substation at 11 KV voltage level.

About pricing, the state government has fixed a purchase price of Rs 2.83 per unit for supply by producers for 25 years, which is much lower than in neighbouring Maharashtra and Rajasthan states that purchase at the rate of Rs 3.15 per unit and Rs 3.14 per unit, respectively.

This has caused a concern among the investors. According to market sources, many investors are planning to shift to these states. This threatens investment worth Rs 1,000 crore already made by developers and another Rs10,000 crore proposed to be made.

A senior government official of the energy department said no decision has been taken about giving subsidies to the units. He parried a question about the possibility of subsidy payment and said the finance department had raised objections.

The official said that the matter was being tossed between the energy, industries and finance departments and investors might have to suffer. The state unit of ASSOCHAM has written to the government over the issue.

It pointed out that the solar power projects would bring investment of Rs 10,000 crore and provide employment to more than 30,000 people for 25 years.

A developer who has invested over Rs 50 crore in setting up three MSMEs said that it would be a great loss “if Gujarat government does not give us subsidy”. He said one of his partners is planning to set up a unit in Maharashtra now.

“The Rupani government should take up the issue seriously and give subsidy to the units. We are helping the government make Gujarat number one but such problems will make investors move to other states,” he added.

State Energy Minister Saurabh Patel said the government is looking into the subsidy issue and will take a positive decision. He said Gujarat has signed a record 4,000 PPAs for 2500 MW. This will make it a green state and independent in power supply.

Source: ahmedabadmirror

Anand Gupta Editor - EQ Int'l Media Network