Now SBI warns against retrospective cuts in solar power

State Bank of India has warned against retrospective tariff cuts for the solar industry by Gujarat.

The bank is drafting a letter on the issue. Solar power developers have warned against the move hinting that it may curb enthusiasm in the rapidly advancing solar industry which is still in its nascent stage in India.

The move by Gujarat Urja Vikas Nigam Ltd, which submitted a petition this month and requested a 28 percent cut in the rate that it pays for electricity from solar plants. The Gujarat Electricity Regulatory Commission will hold its next hearing on the matter on Aug. 5.

The petition alone will have “an adverse impact on investors’ outlook,” Rajat Misra, senior vice president of the infrastructure group at SBI Capital Markets Ltd., which is the lender’s investment banking arm, said in an interview in Mumbai. “It only takes a couple of projects to go back for the entire sector to fall through.”

India joins other such European countries that have taken recourse to such measures for the solar industry.

The developers have strongly argued that tariff revisions are not possible and point out that a tariff order can be challenged within 60 days according to the rules of the state. The tariffs had been decided for 25 years and this reopening of contracts might set up a wrong precedent leading to flooding of applications and countless complaints.

GUVNL wants to cut down on tariffs because of the higher profits being earned. Solar developers however argue that each project has an element of risk and whatever profits generated belong to the person taking risk.

Reference and further reading-

Bloomberg

Read our article entitled – Solar developer oppose Gujarat’s move to revisit solar tariffs