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Home News Power Sector News NTPC forced to cancel 250 MW October 2017 solar auction

NTPC forced to cancel 250 MW October 2017 solar auction

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WTO NTPC Ltd has been forced to cancel the result of its 250 mw solar auction held in October last year, which was won by Azure Power quoting a tariff of Rs 3.14 per unit.

The auction was held under the domestic content requirement (DCR) category, where the winning developer has to mandatorily source solar panels and modules from local manufacturers. It had to be cancelled because it would have fallen foul of WTO norms, sources close to the development said.



Ministry of New and Renewable Energy secretary Anand Kumar confirmed that the auction had been annulled. "We will do the tender again," he said. "Maybe this time the winning tariff will be even lower." NTPC did not comment on the matter.

The auction had to be cancelled because the tender documents had mentioned that the power was to be sold to New Delhi Municipal Corporation (NDMC). "This would have violated WTO rules," said a source close to the development. "India could have been fined heavily if the government had not noticed and directed NTPC to revoke it. But the auction can still be held under the 'developer's mode'."

The DCR category of auctions, intended to help local solar manufacturers, had been mandated by the Jawaharlal Nehru National Solar Mission (JNNSM) ever since it began in 2010, and required 10% of all solar projects built under the mission to use locally sourced material. Developers taking up DCR projects were also provided a subsidy up to a maximum of Rs 1 crore per mw installed. But it proved controversial, with the US complaining to the WTO in February 2013 that it denied global investors a level playing field and contravened the WTO's Trade Related Investment Measures (TRIMs) treaty to which India was a signatory.

The WTO panel, which examined the matter, upheld the US's complaint in August 2015, and again, after India appealed the decision, in February 2016. India then appealed to the appellate body of the WTO which too agreed with the earlier decisions in September 2016. However, the decision left one avenue open -- DCR projects could still be set up provided the power was bought entirely by public sector enterprises or government departments such as the railways or defence services for their own use.. It could not be sold, for instance, to state discoms, which would resell it to retail consumers.

The NTPC auction had to be scrapped because NDMC could not possibly have used so much power for its own needs and would have resold it. "Had NDMC been able to use it for its own power consumption, it would have been different," said Mudit Jain, Senior Manager - Consulting, Bridge to India, a leading solar consultancy. ?

Though NTPC and Solar Corporation of India (SECI) had intended to hold around 2000 MW of DCR auctions earlier in a phased manner, not a single one was held following the WTO appellate panel's decision. NTPC's 250 mw auction was the first. It is also set to be the last, with India and the US having agreed not to hold any more DCR auctions after December 2017.

The government considers supporting local solar manufacturers essential for their survival, since they cannot match either the prices or the technology provided by global players, especially those from China, Malaysia and Taiwan. Solar panels and modules manufactured in these three countries are around 20-30% cheaper than those made in India, and as a result, more than 90% of solar equipment used in Indian solar projects is imported. Despite the subsidy, the winning tariffs in DCR auctions have always been substantially higher than those in open solar auctions. The lowest price reached in an open auction so far has been Rs 2.44 per unit, at a SECI conducted auction held last May.

A $200-billion long-term plan submitted by the MNRE to help domestic players has been turned down by the finance ministry. However, local solar manufacturers, fighting for survival, have petitioned the Directorate General of Anti Dumping and Allied Duties (DGAD) to impose duty on solar equipment from these three countries. The DGAD's decision is awaited.

 

Source- ET

 

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