RUMS Project: Big boost to India’s solar power dreams

PM Narendra Modi dedicating to the nation the 750-MW Rewa Ultra Mega Solar Project, Asia’s biggest, is a notable milestone for renewable energy. By gainfully transforming our massive solar potential and stepping up clean power, we are rightly boosting energy security. Notice that by reaping scale economies in over 40 solar parks nationwide, and via competitive bidding, solar tariffs have tumbled to as low as ₹2.36 per kWh recently.

However, several policy challenges loom, as we strive to meet the 2015 target of 100 GW of solar power by 2022. Solar power capacity is now over 37 GW, and a welcome complement to conventional power plants, true. But we have thoroughly neglected solar rooftop capacity, with its sub-target of 40 GW. In fact, the rampant revenue leakage in power distribution across the land essentially precludes the distribution companies (discoms) from going ahead with solar rooftop capacity. Barely 2 GW of rooftop solar capacity has seen the light of day, given financially moribund discoms. It is a double whammy. As a recent Reserve Bank of India working paper points out, state government guarantees for rising off-budget borrowings, mostly by the concerned state power utilities, have hugely increased the risks of debt sustainability. The paper notes that, on average, power utilities account for 60% of total outstanding guarantees provided by the states. But, for large states like Uttar Pradesh, Tamil Nadu and Rajasthan, guarantees for extra-budgetary funding for the respective discoms are 80% of the total! For other states, like Maharashtra and Bihar, the figure is fast rising too. If the guarantees are invoked, state finances would gravely deteriorate.

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