Indian Regulator Rejects Retroactive Solar Tariff Cut

Indian regulators rejected a cut in solar tariffs paid to generators, in a landmark decision for the country, after developers said it would stall investment.

The Gujarat Electricity Regulatory Commission dismissed a petition by the state government to lower rates agreed under 25-year contracts signed since 2010, it said in an order. The plan to lower current solar tariffs was the nation’s first.

“The parties to the contract are not at liberty to amend or alter the terms of contract saying that the terms of contract may not be beneficial to them at a subsequent stage,” the state commission said in the order posted on its website.

The decision contrasts with cuts in Spain, Greece, Romania and the Czech Republic as governments seek to lower the cost of subsidies and temper a surge in developments. Companies such as Moser Baer India Ltd. (MBI), Essar Energy Plc (ESSR), Tata Power Co. (TPWR) and Welspun Energy Ltd. had objected to the call by state power purchaser Gujarat Urja Vikas Nigam Ltd. for a 28 percent reduction to recoup what it called windfall gains.

The regulator’s ruling “upholds the sanctity of the contract and will help in restoring investor confidence,” Welspun Managing Director Vineet Mittal said.

The state signed power purchase agreements with 88 solar projects totaling 971.5 megawatts, making it the biggest solar power market in India with half of national capacity. Developers said contracts could only be revised to increase generation by mutual consent or if companies failed to build plants on time.

The regulator upheld all nine of the arguments submitted by developers so any appeal would need to overturn each of those, Hemant Sahai, a lawyer representing companies including Moser Baer India, said today in a telephone interview.

“They would have a very tough time of it,” Sahai said.

Raj Gopal, managing director of the state purchaser, didn’t immediately respond to a phone call and e-mail seeking comment.

To contact the reporter on this story: Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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