CAG report highlights the Incorrect tariff fixation by Gujarat Govt for solar projects – Central Excise and Custom exemptions not considered
The Gujarat Government Solar policy 2009 proposed that the energy generated from a solar power project would be sold to the distribution licensees in the State at a levelised per unit tariff for the period of 25 years. Gujarat Electricity Regulatory Commission (GERC) in exercise of power conferred under Electricity Act 2003 issued tariff order (29 January 2010) for procurement of power by the distribution licensees and others from Solar Power Generators (SPG) for 25 years which determined the levelised tariff31 of ` 12 per kWh and ` nine per kWh for SPV and Solar Thermal project, respectively. MNRE vide office memorandum dated 3 June 2010 issued procedure for issue of the certificate for exemption of Excise Duty, on items manufactured for Solar Thermal and SPV power generation projects. The SERCs were required to factor in these exemptions while determining the tariffs. Audit observed that 47 developers sought excise duty exemption for an amount of ` 83.77 crore and customs duty exemption amounting to ` 104.53 crore. Gujarat Energy Development Agency (GEDA) forwarded the information to MNRE but no data regarding exact amount of exemption actually availed by respective developers was maintained and forwarded to Energy and Petrochemicals Department of the Government of Gujarat and/or GERC for working out its impact on the levelised per unit tariff. In absence of receipt of any data on exemption of duties GERC did not factor in the exemptions and fixed the capital cost as ` 16.50 crore per MW for SPV and ` 13 crore per MW for Solar Thermal which were on the higher side as compared to the levelised tariffs of ` 12 per kWh and ` nine per kWh for SPV and Solar Thermal project, respectively. Thus Gujarat Urja Vikas Nigam Ltd. (GUVNL) a State Government company engaged in the business of bulk purchase and sale of electricity continued to pay the higher tariff. The State Government stated (November 2013) that the GERC had set aside (8 August 2013) a petition (1320 of 2013) for revision in solar tariff filed by GUVNL considering determination of appropriate capital cost, actual equity-capital deployed for servicing at 14 per cent, but did not mention the duty exemption parameter. The reply was not acceptable as the non-consideration of exemptions in the capital cost of the project led to passing of undue benefit on to developers and burdens the consumers of the State.