Everybody's business


Solar mission is too important to let doubtful dealings hijack it.

In public perception the renewable energy sector is a do-good sector that promises environment-friendly and affordable energy. It is for this reason that this sector gets overwhelming support from all sections of society. Civil society organisations, including the Centre for Science and Environment (CSE), have worked hard over the years to increase awareness about renewable energy and have pushed the government policy towards ambitious programmes.

Renewable energy is important for India not only because of its environmental credentials, but also because it is going to play a major role in achieving energy security for the country in the future. And within renewable energy, solar energy has the most potential. It was in this context that when the prime minister announced Jawaharlal Nehru National Solar Mission (JNNSM) as part of the National action plan on climate change in 2008, civil society in general welcomed it despite it being the world’s most expensive solar energy programme funded by the public. The 20,000 MW grid-connected solar power that JNSSM plans to install till 2022 will cost the public more than Rs 2 lakh crore from 2012 till 2047. With so much of public support and subsidy, it is in everybody’s interest that the programme succeeds. However, like some other renewable energy programmes, we are finding JNNSM is also getting entangled in bad market practices.

Criticising the renewable energy sector quickly gets one branded anti-environment and pro-fossil fuel. This is the reason people avoid critically examining this important sector. But we at CSE believe strongly that though we want the sector to grow and flourish, we cannot allow it to be undermined by impermissible practices and indifferent bureaucracy. We don’t want the renewable energy sector to get such a bad name that it loses public support and goodwill. That is why we have tried to bring to the fore the lapses and have pushed for reforms.

In 2008, we published our research on wind energy showing the monopolistic nature of the business and how the wind sector was growing but not producing enough electricity. This was happening because of the upfront tax break the wind industry got, prompting even Bollywood stars to own wind farms. We were then roundly criticised and accused of killing a nascent sector. Today, the Ministry of New and Renewable Energy (MNRE) itself has recognises the problem and is contemplating removal of accelerated depreciation benefits for the wind sector. Similarly, we have highlighted the issue of biomass-based power plants that burn coal illegally but take preferential tariff. In JNNSM, we again find doubtful dealings.

When the winners of the reverse bidding for the first batch were announced in November 2010, there were whispers in the market that the winning companies had quoted low prices and that they had done this to grab projects on prime solar land and would later sell them to serious players at a premium. Most wining companies were unknown entities. Very few of them were from the energy sector, leave alone the solar energy sector, and fewer still had websites. The surprising part was that most of the established players in the energy sector, from AP Power Generation Corporation Limited to Moser Baer Power to Essar Power, were not able to win the bids. This should have rung alarm bells.

We now know that one company, LANCO Infratech, put up front companies and managed to get about 40 per cent projects of the first batch of the first phase of the solar mission by using unfair means. They were able to win the bids by clubbing projects and using the economy of scale to reduce prices. In doing so they throttled competition and stopped genuine players from entering the market.

What does this 40 per cent market mean in monetary terms? The tariff the state utilities (indirectly the consumers) will pay for 620 MW auctioned under the first batch of the first phase till 2037 (the projects will get preferential tariff for 25 years) itself will be close to Rs 35,000 crore. LANCO, therefore, will have assured revenue of about Rs 13,000 crore from these projects.

Both MNRE and power purchaser NTPC Vidyut Vyapar Nigam failed to check this scam even when there were signs of illegality. It is difficult to say whether it reflects complicity of MNRE and the power purchaser or sheer incompetence. What is clear is that such lapses in the renewable energy programmes have happened largely because of the non-transparency and questionable processes MNRE has adopted in implementing these programmes. For instance, in JNNSM it refused to disclose any information about the winning companies, apart from their names and project location (see ‘Information on solar mission …’).

India will be spending lakhs of crores of rupees in promoting renewable energy, especially solar energy, but all this will go down the drain if it does not put transparent and fair laws in place that promote competitiveness, innovation and attract serious businesses. With bad market practices and non-transparency that prevail today, energy security and sustainable energy will remain a dream. It is important that MNRE investigates further and learns from what happened during the first phase of JNNSM, punish the guilty and reform the renewable energy sector.