The Ministry of New and Renewable Energy (MNRE) has directed the Public Sector Undertakings (PSUs) to blacklist renewable energy developers that fail to complete the project within the prescribed deadline. The ministry said that the blacklisting could span 3-5 years.

The ministry’s communication was directed to Solar Energy Corporation of India, NTPC, and NHPC. These companies are engaged in issuing tenders for private sector companies to develop renewable energy projects.

The ministry also asked these PSUs to encash the bank guarantees of the developers in case of delay in commissioning projects.

Industry sources said that while encashing bank guarantees for delayed commissioning is a norm, blacklisting companies is alarming.

Additionally, sources said that tender or bid documents come with specific clauses about conditions that would trigger the encashment of bank guarantees, but they don’t usually contain any blacklisting clause.

However, in its communication, the ministry has said that encashing bank guarantees and blacklisting are in accordance with the Government’s General Financial Rules (GFR) and apply to all tenders and bids.

The Finance Ministry recently amended the GFR, 2017, to include provisions for blacklisting organizations that do not meet the government-prescribed deadlines.

“Even if the blacklisting provision is not part of the tender or bid documents, it can be enforced as it’s part of government rules under GFR. However, the ministry’s order is likely to inflict damage to the sector as it could deter investors,” said Aditya K Singh, Associate Partner at Link Legal.

A developer said that the ministry’s direction is a result of failure on the part of many developers to commission projects despite extensions provided. He added that the ministry’s harsh approach stems from its belief that despite extending all help to developers (extension of timelines, proposed suspension of ALMM), they haven’t responded in kind.

MNRE had provided a blanket extension on timelines for all under-construction projects in 2020 due to Covid-19. In December last year, the ministry granted a timeline extension until September 30, 2024, for solar projects under the Central PSU program being implemented by SECI and the Indian Renewable Energy Development Agency (IREDA) on account of supply chain disruptions.

Earlier this year, in January, the ministry extended the timeline for the solar and hybrid power projects until March 2024. The bids for these projects were finalized before the Basic Customs Duty came into effect on April 1, 2022.

However, another developer said that the project commissioning delays are due to several factors, including the demand-supply mismatch in domestic modules due to the Approved List of Models and Modules (ALMM) mandate. He added that the proposal to blacklist developers might be counterproductive for the industry.

The government is under pressure to meet its non-fossil energy targets. But the developers are struggling with the financial viability of projects considering the multiple challenges of module price rise, growing interest rates, rupee depreciation, land acquisition, and power evacuation infrastructure availability.