India has unveiled a new solar energy policy targeting a foreign-currency denominated plan that will make solar power available at INR 4.75 per unit across the country. State-owned firms such as NTPC would invite bids from solar developers on behalf of the Ministry of New and Renewable Energy (MNRE) to sell 15,000 MW of power to states. NTPC is expected to run a reverse bidding process for buying solar power, eventually helping solar projects become bankable by effectuating grid parity.

Developers are expected to quote in the range of INR 3.5o per unit, giving NTPC ample leeway to charge INR 4.75 per unit, with the balance being routed to a hedge fund which will use the payment to cover forex risk. The foreign currency denominated plan may also see NTPC bundling unallocated thermal power in case the rupee depreciates beyond a point. This move will certainly help attract foreign investments into India’s solar power sector by significantly reducing forex risks involved.

For the project, India may include yen besides euro and dollar in the basket of currencies under consideration. The scheme is set to be implemented by state-owned entities NTPC and Power Trading Corp. (PTC) on a pilot basis for 1,000 MW each.

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Source: The Hindu Businessline

This positive move aimed at reducing solar power tariffs comes on the back of state electricity boards not doing enough to buy power owing to poor financial health. With losses of INR 2.5 trillion and debt of INR 3.0 trillion, they are well on the brink of financial collapse.

However, the NDA has ambitious plans for the solar power sector and is aiming at providing renewable power at less than INR 4.5 per unit.

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