The Karnataka Electricity Regulatory Commission (KERC) has proposed a tariff of ₹2.79 (~$0.043)/kWh for new, MW-scale, grid-connected solar photovoltaic (PV) projects developed in Karnataka.

The proposed utility-scale solar benchmark tariff is ₹1.57 ($0.024)/kWh or 36 percent less than KERC’s previous benchmark tariff of ₹4.36 ($0.07)/kWh. The reduction comes amid a trend of declining tariffs in state tenders.

KERC also proposed a tariff of ₹3.27 (~$0.05)/kWh without subsidies for rooftop solar PV projects ranging in size from 1 kW to 1,000 kW. The proposed rate is ₹1.93 ($0.03)/kWh or 41 percent less than the previous benchmark tariff of ₹5.20 (~$0.08)/kWh.

“The drop in proposed tariff levels are very steep and the cost assumptions are extremely aggressive. It is unclear what the project cost assumption of ₹35 million (~$0.55 million) is based on. According to Mercom India Research, average project costs are hovering around ₹44 million (~$0.69 million) especially considering the increased module prices,” said Raj Prabhu, CEO of Mercom Capital Group.

“These proposed benchmark tariffs are another example as to why DISCOMs will be unwilling to procure solar at higher tariffs if safeguard duty or anti-dumping duty is imposed on imported panels. DISCOMs care about procuring energy at the lowest possible price and if solar tariff goes up, procurement will slowdown or completely stop,” he added.

The proposal is open for suggestions and comments until March 5, 2018.

If accepted, the new benchmark tariffs would apply to all new, grid-connected, MW-scale solar PV projects that enter into power purchase agreements on or after April 1, 2018.

In the proposed tariff order, KERC is also proposing to reduce interest charges on debt from 11 percent to 9 percent. It is likewise calling for reducing the interest considered on working capital from 12.5 percent for kW-scale projects and 12 percent for MW-scale projects to a uniform rate of 10 percent for both kW-scale and MW-scale projects.