The Cabinet Committee on Economic Affairs approved setting up of over 5,000 MW of grid connected solar power projects by providing a viability gap funding of ₹5,050 crore.
The VGF support envisages creation of 5,000 MW of capacity in four tranches of 1,250 MW each. While there will be some capacity reserved for projects with domestic content, projects with foreign equipment can also participate in the bidding to get VGF, said Piyush Goyal, Minister of State (Independent Charge) Power, Coal and New & Renewable Energy, on Wednesday.
The projects come under Batch-IV of Phase-II of the Jawaharlal Nehru National Solar Mission which was launched in January 2010 with a target to set up 20,000 MW of grid connected solar power by 2022. The target has been enhanced to 100,000 MW. Project developers will have to take part in a reverse bidding mechanism to avail themselves of the VGF support.
“The Ministry will decide on a tariff from which to start the reverse bidding. We had initially thought of keeping it at ₹4.93 a unit but the way tariffs have fallen, it needs to be reviewed. Those developers seeking the lowest VGF will get the support,” said Goyal.
The support will be capped at ₹1.25 crore for the capacity reserved for domestic content requirement projects and ₹1 crore for all other projects.
The nodal agency for the scheme will be Solar Energy Corporation of India which will also set up a ₹500-crore payment security fund, he said.
The projects can be set up in solar parks or any other location selected by the bidders. The commissioning period will be 13 months from the date of signing the power purchase agreement.
“Due to competitive bidding, there may be savings in the VGF amount of ₹5,050 crore. In that case, the total capacity will be increased from 5,000 MW, so that, maximum capacity can be set up in the VGF of ₹5,050 crore,” an official statement said.
The bidders will be free to make use of fiscal incentives such as accelerated depreciation, concessional customs and excise duties, tax holidays and other such schemes available for solar power projects. However, accelerated depreciation and VGF cannot be claimed together.