Tariff adoption has become a huge challenge: Azure Power CEO

No longer can renewable energy developers take for granted that the tariffs at which they won projects in auctions will actually be adopted, which is proving a big hurdle for the sector, according to Ranjit Gupta, CEO of leading solar developer Azure Power.

The company, which is listed on the New York Stock Exchange, was a pioneer in solar projects in India and currently has around 7100MW of projects across 24 states in the country in different stages of commissioning and construction. Recently Canadian Pension Fund CDPQ became Azure Power’s majority shareholder, raising its stake to 50.9%.

Gupta maintained that earlier state power regulators routinely endorsed whatever price state discoms signed their power purchase agreements (PPAs) at. But in the case of a 90MW solar project Azure Power won in Assam at a tariff of Rs 3.37 per unit in June 2018 – much publicised at the time as the biggest solar project in the northeast – the Assam Electricity Regulatory Commission has yet to grant permission. Called ‘tariff adoption’, this should have been done shortly after the signing of the PPA with the Assam discom.

With the AERC withholding its decision, the Rural Electrification Corporation has also held back its promised financing of the project.

“Tariff adoption is becoming a challenge,” said Gupta. “We are scrambling. The PPA is signed, construction has begun, but there is no assurance regarding the tariff. We’ve approached the Assam Chief Minister’s office, but nothing has happened yet.” He questioned why the PPA had to come first, with tariff adoption following.

“There’s no reason why the PPA has to be signed before tariff adoption,” he said, adding that it should be the responsibility of the discom to ensure tariff adoption rather than that of the developer. “All approvals should be in place before the discom signs,” Gupta said.

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