Guidelines for
Implementation of Scheme for Setting up of 2000 MW Grid-connected Solar PV
Power Projects under Batch-III “State Specific VGF Scheme”
1.5 Scope and Objectives of the Guidelines 1.5.1 The Scope
of these Guidelines is to provide the necessary policy framework and mechanism
for selection and implementation of 2000 MW Grid-connected solar PV power
projects with Viability Gap Funding under Phase-II, Batch-III of JNNSM. These
guidelines are independent and will have no bearing on the projects already
selected under earlier schemes of NSM Phase-I & Phase-II.
1.5.2 One of the main thrusts of this batch is to further
encourage competitiveness through scaling up of project sizes and introduction
of efficient and transparent ebidding and e-auctioning processes. The main objectives
of the Scheme are: i) Scaling up of sizes of projects thereby leading to
economies of scale. ii) Facilitating speedier implementation of the solar power
projects through adoption of mechanism of solar parks to meet the Phase-II
target of JNNSM. iii) To supplement Grid power and spread out solar power
projects throughout the country thereby reducing transmission cost and losses.
iv) Provide long-term visibility and road map for solar power development
enabling creation of India as manufacturing hub in the Solar PV. v) To create
good business model and systems for various State Governments and DISCOMs to
take forward. vi) To facilitate energy security and fulfilment of RPO
requirement of the obligated entities.
1.6 Phase-II, Batch-III: State Specific VGF Scheme The Solar
Projects of 2000 MW Capacity under the State Specific VGF Scheme will be set up
in the Solar Parks of various states, to be developed through coordinated
efforts of Central and State Agencies. As implementation of solar parks have begun
recently, it could be possible that Solar Parks in some of the States do not
become available soon. For such States, Solar Projects would be allowed to be
located outside solar parks with land being provided either by the State
Government, or arranged by the Solar Power Developers (SPDs). These Guidelines
shall form the basis for selection of Grid Connected Solar PV projects under
this scheme. Out of total capacity of 2000 MW, a capacity of 250 MW will be
earmarked for bidding with Domestic Content Requirement (DCR). MNRE shall
specify the total State-wise Capacity of the Projects (both “Open Category” and
“DCR Category”) based on commitments from the State for off take of not less
than 90% of the Capacity to be invited by SECI before issue of Request for Selection
(RfS). SECI shall tie up for the remaining capacity with the other Buying
Entities for which the Host State shall facilitate Inter-State transfer of
power. 1.7 Mechanism of Viability Gap Funding (VGF) in the Scheme This scheme
envisages providing Viability Gap Funding through SECI to the bidders selected
through a transparent bidding process to procure solar power at a
pre-determined fixed tariff. The salient feature of the overall mechanism would
be as follows: a) The tariff payable to the Project developer is fixed at Rs.
5.43/ kWh for the initial year and then escalated annually by Rs. 0.05/ kWh for
next 20 years, resulting in the maximum allowable tariff of Rs 6.43 / kWh at
the end of 21st year. The tariff would thereafter, remain fixed at Rs. 6.43/kWh.
The levelized tariff for the term of the Power Purchase Agreement thus becomes
Rs. 5.79/kWh. The bidders will be free to avail fiscal incentives like
Accelerated Depreciation, Concessional Customs and Excise Duties, Tax Holidays,
etc. as available for such projects. The same will not have any bearing on
comparison of bids for selection. As equal opportunity is being provided to all
bidders at the time of tendering itself, it is up to the bidders to avail
various tax and other benefits. However no developer will be allowed to claim
both VGF and AD benefit. Therefor only those developers who bid zero or
negative VGF can claim AD benefit. No claim shall arise on SECI for any
liability if bidders are not able to avail fiscal incentives and this will not
have any bearing on the applicable tariff. b) The Project developer will be
provided a viability gap funding based on his bid. The upper limit for VGF is
kept at Rs.1.0 Crore/MW for open category (Rs. 1.31 Crore/MW for projects in
DCR category). c) The selected Project developer has to demonstrate/infuse
capital in the form of Equity for an amount of at least Rs. 1.2 Crore/MW. The
remaining amount can be raised as loan by the developer.
d) The VGF when paid by the SECI may be used to return part
of the loan or developer contribution (in excess of Rs. 1.2 Crore/MW) or a
combination thereof as the case may be, in case investments have already been
made. SECI will issue a letter confirming sanction/ grant of VGF at the time of
signing of Power Purchase Agreement (PPA), so that the Project developer is
able to achieve financial closure for full amount, if required. e) The VGF will
be released in six tranches. 50% on successful commissioning of the full
capacity of the project (COD) and the balance 50% progressively over next 5
years subject to the project meeting generation requirements (CUF within
specified range as per Clause 3.15.1), as under: End of 1st Year from COD – 10%Ø End of 2nd Year from COD – 10%Ø End of 3rd Year from COD – 10%Ø End of 4th Year from COD – 10%Ø End of 5th Year from COD – 10%Ø f)
If the project fails to generate any power continuously for any 1 year within
25 years or its major assets (components) are sold or the project is dismantled
during this tenure, SECI will have a right to refund of VGF on pro-rata basis
and if not paid by the developer then a claim on assets equal to the value of
VGF released, on pro-rata basis as specified hereunder: Year of default (From
COD) SECI’s right to refund of VGF/ claim on assets (% of VGF paid) Up to 5
years 100% 5-6 years 90% 6-7 years 80% 7-8 years 70% 8-9 years 60% 9-10 years
50% 10-11 years 40% 11-12 years 30% 12-13 years 25% 13-14 years 23% 14-15 years
21% 15-16 years 19% 16-17 years 17% 17-18 years 15% 18-19 years 13% 19-20 years
11% 20-21 years 9% 21-22 years 7% 22-23 years 5% 23-24 years 3% 24-25 years 1%
6 g) If the project is transferred or sold to a third party during its tenure
(after initial lock-in period of 1 year), SECI will retain full rights to
operationalize the PPA with the third party, which will be under full
obligation to honour all the obligations and terms & conditions of the PPA.
h) Solar Power Developers (SPDs) and SECI shall enter into suitable VGF
Securitization Agreement creating a charge over the Project assets in favour of
SECI along with signing of PPA. SECI shall have a second charge over the
Project assets in case of Projects being financed by lending institutions. In
all other cases, SECI shall have the first charge over the Project assets to
the extent of 110% of the VGF amount. i) In case the lending institution
exercises its right to step in or take over the project, SECI will also have
right to step in along with the lending institution to reclaim VGF in
accordance with sub-clause (f) above or handover the project to another party
for operation. j) The VGF bidding may also be negative. In that case, the
developers will pay to SECI the agreed negative VGF in the installments in the
same pattern as designed in (e), which will go into the Payment Security Fund
or there may be a provision for quoting a discount on tariff. SECI may specify
one of the two options in each RFS. In case of discount on tariff option, the
bidders who bids / wants to bid negative VGF will bid zero VGF and indicate
discount in paisa on tariff which will be applied on tariff for all the years.
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