Indian ministry recognises pass-through ‘urgency’ in letter to regulator

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Vinay Rustagi, managing director of consultancy firm Bridge to India, said 'it is symbolic as the pass-through will be provided only where allowed specifically in the PPA'. Credit: Getty

India’s Ministry of Power (MoP) has sent a letter to the Central Electricity Regulatory Commission (CERC) asking it to accelerate the pass-through option in the case of any ‘change in law’ that affects power project costs, including the safeguard duty on solar imports.

The pass-through must be approved by the appropriate commission, but MOP stated that generating companies are facing difficulties in getting the pass-through because of considerably time-consuming approval processes that are resulting in severe cash flow problems for the power producers. This has also resulted in stress in the power sector, said MNRE.

This is pertinent given India’s recent imposition of a 25% safeguard duty on solar imports, which has subsequently been deferred until further notice, but which still threatens to raise costs for developers unless a pass-through on the duty is delivered. The pass-through option for a ‘Change in law’ is applicable between the time the bids for PV project capacity are submitted and the date of the invoice for the solar modules procured.

MoP has now directed CERC to issue a pass-through for any change in domestic duties, levies, cess and taxes that change costs, unless the PPA states otherwise. CERC must determine the per unit impact of the relevant change in law and issue the order for a pass-through within 30 days of the petition filing, speeding up the overall process.

Vinay Rustagi, managing director of consultancy firm Bridge to India, told PV Tech: “It is symbolic as the pass-through will be provided only where allowed specifically in the PPA. Also, CERC will have a role only in limited pan-India (ISTS) tenders. The important role is to be played by state regulators (SERCs), who often take a somewhat independent approach.

“But it is still a positive sign that the government recognises the urgency of the situation and is trying to expedite resolution.”

While multi-gigawatts of pan-India Interstate Transmission System (ISTS)-connected solar tenders have been issued in recent months, there are still specific state tenders and some solar parks tenders being carried out.

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