India to blacklist green firms, promoters feigning covid as exit excuse2 min read . Updated: 01 Sep 2020, 07:55 AM IST
The govt also plans to censure promoters of such companies, preventing them from taking part in future projects
NEW DELHI : India plans to take strict action against green energy firms and their promoters feigning the covid-19 as an excuse to exit projects that they were awarded, said three people aware of the developments, requesting anonymity.
This assumes significance given that India is running what will become the world’s largest clean energy programme, and comes in the backdrop of some wind-energy developers seeking ‘low-cost exit options’ for unviable projects.
The government plans to not only blacklist such companies, but also censure their promoters, preventing them from taking part in future projects. With some project developers exploring termination of their power purchase agreements (PPAs) without encashment of bank guarantees, the ministry of new and renewable energy (MNRE) has taken a dim view of such practices as it can impact India’s green energy plans.
“The projects were awarded through an open auction in which these developers willingly participated. The government has been trying to help the sector with measures such as awarding relief to those invoking force majeure. Interest rates have also come down. While we are open to helping the industry, it should not be misused," said a senior government official.
“Where is the question of a low-cost exit option? As far as covid-19 is concerned, the government has already given time extension," he added.
An MNRE spokesperson declined to comment.
PPAs signed by developers have strict commissioning deadlines and failure to meet them can result in fines and encashment of bank guarantees. The expenditure department of the finance ministry has issued instructions that on the invocation of force majeure clause due to the pandemic, contract period may be extended for a period of not less than three months and not more than six months without imposition of any cost or penalty on the contractor, or concessionaire.
“While the issue (of low-cost exit) was discussed among developers, exiting doesn’t seem like a solution as no government will allow it," said the chief executive of a New Delhi-based clean energy firm.
The Centre stand comes at a time when project developers are averse from putting resources into contracts that are delayed and onerous to perform. To be sure, the wind energy sector was facing issues even before the pandemic hit the Indian economy hard include change in states’ land allocation policies, delay in electricity tariff and PPA adoption by state electricity regulators, payment delays, and financing and transmission-related challenges.
“There are terms and conditions that need to be followed as per the terms of the PPA. It’s not so easy to exit. The government will follow all due process as laid out in the contract conditions," said a second government official.
India’s falling clean-power tariffs have put awarded 16.8 gigawatts (GW )solar and wind energy capacity in limbo, as the fund-starved discoms are tariff-shopping and are reluctant to ink power supply agreements (PSAs) for these projects, Mint had reported earlier. This also comes in the backdrop of the Andhra Pradesh and Punjab governments seeking to renegotiate clean energy contracts for operational projects.
Government data till June shows discoms owe ₹10,000 crore in payments to green energy firms. This comprises about 9% of the ₹.14 trillion in overdue payments to generation firms for electricity purchases. India plans to have 175GW of clean energy capacity by 2022, including 100GW from solar projects and 60GW from wind power.