Solar Developers Seek Transparency in DISCOM Payments, Approvals and Grid Curtailment

In the recent strategic meeting held by the Solar Power Developers Association (SPDA), the key industry stakeholders deliberated upon major issues affecting the developers ranging from deviation settlement issues to payment security mechanism.

An official communique from SPDA said that the top priority point discussed in the meet was the payment security mechanism touching upon the delay in payments by DISCOMs, particularly from the states of Andhra Pradesh and Telangana. The meeting also covered the allied issues of liquidity crunch, and debt servicing constraints being faced by the developers.

The issue of lack of transparency in bill processing by DISCOMs was also raised during the meet with the members suggesting that a system of first-in-first-out should be followed by DISCOMs and the content should be made public. Further, a portal where the payment dues of DISCOMs can be uploaded was also suggested by the stakeholders.

The PPAs with higher tariffs were observed to be facing greater payment delays by the members, and it was suggested that the center should try and provide some assistance to the states that have pioneered the renewable movement in the country by providing them a portion of the accrued cost.



Moreover, there was a suggestion to include the delay by government agencies in providing permissions or clearances under the Force Majeure clause (which deals with unforeseeable circumstances) of the PPAs, with the stakeholders proposing that the developers should be granted extension in such cases.

On another crucial subject of Renewable Purchase Obligation (RPO) compliance, it was suggested that it should be calculated based on renewables purchased by DISCOMs for which the payment has already been made, and the state commissions should verify it before acknowledging compliance.

Besides RPO, another long withstanding issue of GST and Safeguard Duty components were deliberated upon, and it was observed that though recognized as a ‘Change of Law’ event, several utilities are yet to reimburse the amounts. For this, it was suggested that the carrying costs on the amount, as described under Change in Law need to be included in the PPAs.

A few months ago, the SPDA had written to the government following the recommendations proposed after the 31st meeting of the GST Council. As reported by Mercom previously, it had noted that the new recommendations from the council have made the effective tax rate to be 8.9 percent, which is considerably higher when compared to the rate of 1.5 to 2 percent in the pre-GST era. Moreover, in another letter to Jaitley expressing its concerns on the way additional taxes such as GST are being levied over safeguard duty. In the letter, SPDA has said that solar power companies are paying tax (Safeguard) on tax (GST).

Speaking at the meet, Shekhar Dutt, Director General of SPDA said, “SPDA as an industry body is playing a pivotal role and working closely with the government, financial institutions, regulators in shaping the future of the solar industry in India.”

Since the amounts arising out of the ‘Change of Law’ are high, the association members suggested an annuity plan for stressed DISCOMs to be paid throughout the tenure of the PPAs.

Deliberating on the forecasting and scheduling penalties, the members stated that since renewables are dependent on the weather, fully accurate forecasting is not possible, and the regulators should try to follow the U.S. or German government’s model on deviation settlement, where the developers are not penalized.

On the issue of frequent grid curtailment by the state load dispatch centers (SLDC), the developers opined that there had been a lack of operational transparency in the system. However, the members added that Rajasthan as a model state was performing better on this front.

In the meeting, the stakeholders also suggested that a national level online register should be created with the Central Electricity Authority (CEA) so that all the dates of such curtailment are recorded for transparency.

Funding challenges prevalent in the sector were also acknowledged, and the SPDA has assured them that it would present the developers’ suggestions to the Reserve Bank of India (RBI).

Moreover, members suggested changes in the commissioning timeline of solar projects: 21 months in case of solar parks and 24 months for non-solar park projects.

Some members also observed that the State Electricity Regulatory Commissions have been delaying the tariff adoption process, and it was proposed that the DISCOMs should take the approval of ceiling tariff before inviting bids so that any bid under that ceiling tariff is adopted expeditiously. In a similar vein, the members suggested that the effective date of the PPA should not be the date of signing, but the date of tariff adoption.

The members also noted that while the sale of power to the third party through open access and under group captive projects are permitted under the law, several DISCOMs decline the issuance of “No Objection Certificates (NOC)” as mandated. For this, the association has requested the government to issue guidelines to the DISCOMs for compliance.

“We strongly believe that with unlimited availability of sunshine, solar can soon become the mainstay of energy supply with energy storage solutions and pave the way for a greener and sustainable future.  The government should also consider the deployment of solar energy for the upliftment of farmers through solar pump sets, powering cold storages and food processing industry,” concluded Shekhar Dutt.

Recently, Mercom also reported on the SPDA writing to the MNRE for resolving the Telangana developers’ issue of non-payment of dues from the state DISCOMs.

Image credit: computer_saskboy [CC BY 2.0]