Centre keen to realise 2020 solar vision, issues letters of intent

Recently the government issued letters of intent to interested companies to go for financial closure for quickly starting the project work, said the National Solar Mission document prepared by the Prime Minister’s Office—a copy of which is available with Deccan Herald.

The mission, finalised by the Prime Minister’s panel on climate change last month, suggests having an installed solar capacity of 20,000 MW by 2020 and achieving grid parity in the same year.

As many as 15 companies, including Reliance Industries Ltd, Tata Solar Power, Tata BP Solar Power, Phoenix Solar Power, Titan Energy Systems and Signet Solar Inc, had approached the government under the special incentive package scheme to set up manufacturing units for solar photovoltaic units.

The combined capacity of these 15 companies could result in the production of 10,000 MW solar power by 2017, which would be sufficient for mission targets.

To achieve the 20,000 MW target by 2020, the solar mission has proposed Rs 44,566 crore in three phases, a majority of which will go into subsidising solar power. The requirement for phase I (2012-17) is Rs 10,130 crore whereas phase II (2012-17) will require Rs 22,515 crore. The proposed allocation for the last phase (2017-2020) is Rs 11,921 crore.

Funding
The requirement may be met either from budgetary sources or from the proceeds of a small cess on all fossil fuels (20 paise per 10,000 kilo calorie). The cess could result in mobilising up to Rs 3,680 crore annually in the initial stage, which will grow each year. It will be sufficient to meet the pay-out of generation-based incentives (GBI).

The GBI is a special subsidy for solar power announced in January 2008. Developers will sell electricity to state-run utilities and the incentives will be paid to them based on the tariff the utilities provide. For solar power fed to the grid, GBI is Rs 10 per kilowatt hour.

For photovoltaic panel on the rooftop—grid connected or stand-alone—and additional GBI of Rs 1.5/kwH has been recommended. 

According to the mission document, the GBI is valid for a period of 20 years and will be over and above any other financial assistance. The mission anticipated total funding requirement of Rs 91,684 crore by 2040 out of which Rs 69,985 crore will be the GBI component to make solar power competitive.

Other proposed fiscal incentives are 10-year tax holiday for utility scale solar plants, certain exemptions from customs and excise duties and interest subsidy. To displace diesel generators, UPS and invertors with solar-based system, the mission recommends 10-year soft loans with 2 per cent interest from rural banks.