High tariffs: Gujarat cancels 500-MW solar auction

By: |
New Delhi | Published: April 18, 2018 2:18:55 AM

GUVNL had informed the potential bidders in advance that additional costs (assorted duties and cesses) were not liable to be passed through — a reason, experts claim, why bidders were extra-cautious and refrained from the aggression observed in previous solar auctions.

high tariff, gujarat, solar auctionThe Gujarat government has cancelled the 500-MW solar auction held recently as it found the tariffs “discovered were on the higher side”.

The Gujarat government has cancelled the 500-MW solar auction held recently as it found the tariffs “discovered were on the higher side”. The lowest tariff discovered in the bidding that took place in March was Rs 2.98 per unit, compared with the all-time low solar tariff of Rs 2.44 per unit found in May last year for the Bhadla project in Rajasthan. The Gujarat Urja Vikas Nigam’s (GUVNL) decision comes a week after the ministry of new and renewable energy amended the bidding norms for solar projects, clarifying that all indirect taxes can be a pass-through, under the “change in law” provision. GUVNL had informed the potential bidders in advance that additional costs (assorted duties and cesses) were not liable to be passed through — a reason, experts claim, why bidders were extra-cautious and refrained from the aggression observed in previous solar auctions.

In January, the Directorate General of Safeguards recommended provisional safeguard duty of 70% on solar cells and panels, but the timelines and scope for implementation are not clear yet. While Ahmedabad-based Kalthia Engineering was the lowest bidder in the latest round of reverse auction by GUVNL, the other winners were state-owned Gujarat State Electricity Corporation as well as private firms ACME and Azure Power. GUVNL is learnt to have informed the participants about the cancellation of the auction process on Monday, citing Clause 3.22 of the request for proposal document which states that GUVNL reserves the right to annul the bidding process “at any stage without assigning any reasons”.

GUVNL had received only 11 bids of 1,590 MW for the auction, a sharp decline from the 24 bids, totalling a capacity of 3,600 MW, offered for the previous 500 MW solar auction conducted by the state in September 2017 when the lowest tariff discovered was Rs 2.65 a unit. A senior GUVNL official told FE that the “greenshoe option” offered in this auction was also suspected to have played a role in suppressing participation. Under this option, GUVNL could allocate another 500 MW capacity to companies if they agreed to match the lowest tariff discovered in the initial auction. Since this option was available only to companies not making it to the final list of bidders, it may have been possible that private players deliberately refrained from bidding in the first round. The “greenshoe option” will not be included when the state re-invites tenders, which would only happen after getting more clarity on the safeguard duty issue, sources said.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Next Stories
1Ongoing cash crunch worsens in rural Gujarat; several ATMs and banks are running dry
2Cash crunch: RBI clarifies sufficient cash in currency chests, printing of notes ramped up too
3India to beat China again: To re-emerge fastest growing economy; IMF predicts 7.4% GDP growth this year