Solar power developers are set to oppose the recent directive of the Uttar Pradesh government asking them to lower tariffs under extant power purchase agreements (PPAs). While indications are that the regulator’s view is also not favourable to them, developers might resort to litigation. Stating that PPAs had been signed when equipment prices were high, the government asked developers to revise tariffs to match the lowest bid of Rs 7.02 per kwH in relevant auction. The government’s move was also prompted by the fall in solar power tariffs in subsequent auctions conducted in the country. Of the 15 developers who had signed contracts for 215 MW solar power auction at tariffs ranging between Rs 7.02 per kwH and Rs 8.60 per kwH in December 2015, four — Sukhbir Agro Energy, Lohia Developers, Shree Radhey Radhey and NP Agro — have refused to cut tariff.
These four developers, along with two others – Agarwal Solar and Surana Telecom and Power – have already installed their projects and have started providing 65 MW to the state grid. Among 15 players, Adani Green Energy bagged a 50-MW project at a tariff of Rs 8.43 per kwH, while Essel Infra Projects won a bid for 50 MW at a tariff of Rs 7.02 per kwH. Sukhbir Agro Energy won three projects having total capacity of 50 mw. Speaking to FE, an official with one of the companies which have refused to compromise on the rates, said: “It is unfortunate that the government wants to rescind on agreements it had signed with us earlier. These PPAs had been duly cleared by the state Cabinet. Annulling them now would send a very wrong message, not only to investors, whom the state wants to woo, but also to lenders which already have a negative view of UP.”
Stating that investment of around Rs 1,200-1,300 crore is riding on these projects and almost 60-70% of that investment already put in, another investor whose project is complete said if the old PPAs are cancelled, all these investments will come under risk. “Our company has worked very hard to finish the projects on time. We have taken loans from banks for the same and are repaying the installments as well as managing working expenses from our own pockets as the tariff is yet to be approved by UPERC even after 18 months since we signed the PPAs. Now, if these PPAs are scrapped, banks will not agree to it and would, in all probability, recall the loans, which would force us into NPAs for no fault of ours,” he said.