Indian Government Approves $1.2 Billion Support For 12 Gigawatt Solar Power Plan

The Indian government recently approved a funding scheme to support implementation of 12 gigawatts of solar power capacity through government-owned companies.

Earlier this month, the Cabinet Committee on Economic Affairs approved a plan to provide financial support for development of 12 gigawatt solar power capacity across the country. The proposal was submitted by the Ministry of New and Renewable Energy (MNRE) and shall be implemented through companies owned by the central and state governments. The government allocated Rs 8,580 crore ($1.2 billion) for this scheme which shall be disbursed as viability gap funding to project developers. 

The government has also mandated that all projects under this scheme shall use solar cells and modules manufactured in India. As the power generated from these projects shall be used by the government itself or government entities, the obligation to use domestically manufactured equipment would stand the test of WTO norms.

The Indian government, in order to boost domestic manufacturing of solar cells and modules, had earlier introduced the Domestic Content Requirement (DCR) that mandated project developers to use Indian solar PV equipment to set up projects. This was successfully challenged by the United States at WTO, and the Indian government had to put an end to that scheme. Due to security concerns the WTO, however, allows mandatory use of domestic equipment if the output is being consumed by the government or its entities. India is planning to use this clause to implement this scheme.

The viability gap funding scheme will be implemented in a manner similar to any other scheme — through reverse auctions. instead of bidding for the lowest tariff project developers shall bid for the lowest capital cost support required to set up projects.

The 12-gigawatt scheme was approved just weeks after the government decided to scrap a part of another scheme that had lost its relevance due to change in market conditions. We reported in late December 2018 that the Indian government would not go ahead with the auction of 12-gigawatt capacity under the bundling scheme. A replacement to the cancelled bundling scheme was essential for the government to fill gap created to achieve the 100-gigawatt installed capacity target by March 2022. The new viability gap funding projects shall, however, be fully completed by March 2023 only.

The scheme seems a stop-gap measure to ensure there is no latency in implementation of projects for the 100-gigawatt target. The government essentially has taken it upon itself to fill this gap. Several government-owned companies has already been asked to set up large-scale solar power projects. These include the likes of Coal India, Indian Railways, the Indian Armed Forces, NLC, shipping ports, airports, and oil marketing companies.

The government estimates that the scheme would bring in Rs 48,000 crore ($6.75 billion) in investments, and create around 180,000 jobs across industries.