JNNSM A Fraud?

India has been rocked by scams in almost all industrial sectors be it telecom, aviation, real estate, construction, defence etc. Renewable energy is not immune to the general malaise and recently a large solar scam was unearthed in India’s southern state of Kerala. Top ministers were involved with actresses making it a regular “tamasha”. As usual nothing came out of it as is the wont with all corruption scandals in India involving top politicians/ bureaucrats. The media circus continues for a month or two before a new corruption scandal comes up. The scandal investigation mainly consists of hyperbole by both sides with little grounding in facts.

Read on GWI India Solar Subsidy JNNSM Guide – What you needed to know.
The Left wind parties in India have termed the whole India solar subsidy scheme a scandal on the basis of the Kerala scandal. We examine if this is true or not. My first impression is that India’s solar subsidy scheme has managed to get one of the lowest electricity rates in the world with solar developers earning little in the way of profits. The reverse auction scheme has seen over competition leading to losses for many of the developers. This means that the scope of corruption is low given that there are little profits to be siphoned off.

The allegations is that while the government pays $3.5/watt for an off grid solar power plant the cost is only $1.1/watt. This is total bollocks. Even the biggest utility solar power plants in the world will cost at least $1.1-1.3/watt in the world with their large economies of scale. Small rooftop solar power plants cost much more as the installation and commissioning costs are much higher. Balance of System costs also are higher for the smaller power plants as they lack the scale. Likewise permitting, inspection and testing costs will be higher. It will cost at least $2.5-3/watt for building an off grid solar power plant, which means that this accusation of windfall profits being made by empaneled solar vendors is nothing but hyperbole.

Business Line

The MPs said the benchmark price fixed by the Government agencies for the off-grid roof top solar units is around 2,10,000 per 1 KVA. They said in Kerala, a consumer pays Rs 1,15,000 to install 1 KVA solar power at his house, while the balance of Rs 95,000 will go to the empanelled Solar Company, through the implementing agency of the State as Centre and State Government subsidies. The MPs argued that the actual cost of panels is about Rs 70,000 per 1 KVA. “This is resulting into windfall profits for companies who are ‘fortunate’ enough to get empanelled by the Government. By investing just Rs 70,000, these companies are getting a profit of around Rs 1,40,000 thousand, which is a profit of 200 per cent,” the MPs said in the letter.