Govt slaps fine on 14 PV firms for missing deadline

NTPC Vidyut Vyapar Nigam Ltd (NVVN), the government agency entrusted with rolling out the 1,000 MW, Phase-I of the National Solar Mission (NSM), has slapped fines on 14 projects with 70MW capacity for missing the January 9 commissioning deadline in the first round of developments, which were allocated in late 2010.

NVVN, a unit of state-run NTPC Ltd, has encashed the bank guarantees submitted by these companies (as fine) as they had not commissioned their solar photovoltaic projects.   Only 30 PV arrays (of 5MW apiece) were allocated in the 2010 tender.

Three of the developers are backed financially by Lanco Infratech, which is under investigation for allegedly establishing front companies to allow it to participate in more first-round projects.

Electromech Maritech, DDE Renewable Energy and Finehope Allied Energy are building 5MW arrays in Rajasthan. Lanco, which denies the allegations, is also involved in engineering, procurement and construction (EPC) for several other projects, which are facing financial penalties.

“NVVN has encashed the bank guarantees. They (companies) didn’t meet the deadlines. Lanco, apart from having 105 MW, is doing EPC in seven projects and also holds some equity in them,” Tarun Kapoor, joint secretary at the ministry of new and renewable energy, told Livemint.
The modest fine – averaging about $40,600 per project – aims to spur developers towards a rapid completion, rather than crippling them or putting them out of business.

But the sheer number of projects being considered for fines, on top of the ongoing investigation into Lanco, underscores the growing pains and legal vagaries pervading the fast-growing Indian photovoltaic (PV) industry.

Some of the fines appear to be targeted at projects that had entered construction and were already generating some electricity before the deadline date, forcing the government into somewhat murky legal territory.

The government also considered to enter 25-year power-purchase agreements from January 9 with these companies, thereby lowering the amount of revenue the late projects would bring in during their lifetimes.
After paying the fines the developers will have two more months to commission their projects before facing another fine. After that, they will be given a final three months to finish before their project will be scrapped from the NSM.
Under JNNSM, projects totalling 610MW based on photovoltaic panels (140MW) and solar thermal technology (470MW) were awarded. Another award of 350MW based on photovoltaic panels was recently concluded with power-purchase agreements signed with 22 companies.

Lanco issue

Earlier this month the Centre for Science and the Environment (CSE), a Delhi-based sustainability advocacy group, alleged that Lanco broke the rules governing the NSM’s first round by grabbing “no less” than nine projects worth 235MW (including a 100MW solar-thermal project).

CSE claims that Lanco has gained a controlling interest in the developers through its employees and their children, and adds that NVVN is attempting to cover up the situation.

The government has established a group comprising three public agencies to investigate the claims, with a final report to be issued soon.

Strongly objecting to the allegations, Lanco, said it has equity participation “in few” of the winners, and when it does have a stake, it falls within the “permissible level allowed”, sustainability portal recharge, said.

The government intentionally limited the amount of projects each company could win in the first round in order to keep large, deep-pocketed companies like Lanco from immediately establishing a dominant position within the PV sector during its early days.
Ironically, knowing that Lanco was so interested in PV would have pacified many critics of the NSM, who believed the sector would be hindered by allowing so many small, inexperienced developers to win projects.