Madhya Pradesh solar policy gives a new shine to the Indian solar market

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Madhya Pradesh, the second largest state in India, released its first solar policy last month, inviting bids for projects worth 200 megawatts (MW). In a marked departure from the existing policies in states like Karnataka, Rajasthan, Gujarat and Odisha, the policy does not mandate any geographical limits on the location of the project, according to a report. Therefore, they can be located in any other state. For transmission, a Power Purchase Agreement (PPA) with Madhya Pradesh Power Trading Company (MPPTC) can be signed.

In other aspects too, this policy adopts a new approach. For example, the size of solar projects may vary from five MW, to as much as the complete capacity to be allotted: 200 MW. For a project located outside Madhya Pradesh, the minimum size of the plant must be 10 MW. The Odisha Solar Policy is an exception – it allocated its complete capacity of 25 MW to a single bid by Alex Green Energy last month, and also did not specify the maximum capacity allowed for a project. With a similar scenario under the Madhya Pradesh Solar Policy, bids for projects of size greater than 25 MW can be expected.

The Madhya Pradesh policy further specifies separate deadlines for projects of different sizes. The commissioning deadline for projects up to 25 MW is 13 months. It is proportionally more for larger projects – for example, for a 200 MW project, there is a 24 month deadline. This is the longest commissioning time allowed under any solar policy in India.

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Although these deadlines make project execution seem more feasible and will be a boon for project developers, they will also attract many smaller and inexperienced players to take part in the bidding. Such participation could eventually lead to aggressive bidding, especially by the players who are serious about operating in the Indian solar industry.

The policy additionally makes an exception in the way it has structured its penalty clauses. There are different penalties for different stages of delay. The Performance Bank Guarantee (PBG) will be enchased, but in three steps: 20 per cent of PBG after delay by the first month; 40 per cent of PBG after the second month; and 100 per cent after the third month of delay. It also specifies a provision for the completion of project after an initial three month delay.

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