Despite the unexpectedly lukewarm response to its latest solar tender, the Karnataka government has decided not to reissue it but instead allot to the three bidders projects of whatever size they had bid for.
Karnataka Renewable Energy Development Ltd (KREDL) had issued a 1,200 MW tender for projects at its Pavagada Solar Park, at a reserve tariff of Rs 2.93 per unit, setting a deadline of February 21. But the tender received only two bids of 100 MW each. KREDL nor the winning developers were willing to comment on the matter.
The response to this tender was in sharpBSE -4.96 % contrast to the earlier one issued by KREDL in January this year for 860 MW across 43 talukas of the state, which saw 18 developers seeking a total of over 1,800 MW. The main reason, developers felt, was the reserve price set by KREDL, which in the earlier auction was Rs 3.57 per unit. The winning bids spanned a wide range of Rs 2.94 per unit to Rs 3.54 per unit across different talukas. Emboldened by this, KREDL set its new reserve price at Rs 2.93 per unit, just below the lowest winning bid at the previous auction. But tariffs had clearly bottomed out.
Solar tariffs, which have fallen steeply since 2015, are unlikely to do so any longer for several reasons. On the one hand, the cost of solar modules, mostly imported from China, is no longer falling as before, while on the other, solar developers have the threat of safeguard duty and anti-dumping duty hanging over solar imports.
Following complaints from local solar manufacturers that imports were crippling their industry, the Directorate General of Safeguards has proposed 70% duty on solar imports, while the Directorate General of Anti Dumping is still examining whether anti-dumping duty should be imposed too. Either duty if implemented is bound to increase solar developers’ input costs considerably and thereby increase solar tariffs.
Karnataka currently has the highest solar capacity among Indian states, with 3,657.52 MW commissioned by the end of February this year.