Viability gap funding (VGF) for capital cost in solar projects is the new mantra under JNNSM Phase 2

Taking experience of phase 1, the government wanted to move away from reverse bidding scheme for selecting the project proponents under the NSM. The phase 2 proposes viability gap funding through a PPP model. Under this scheme a capital grant will be provided to cover the VGF in terms of project cost per MW. Under this option, bidders will bid a VGF requirement in Rs. per MW and the bidder with minimum VGF requirement would be selected. This scheme is expected to remain simpler and will provide upfront part of the capital cost at the time of commissioning of the project itself. However, the scheme will not be able to enforce quality checks in terms of project installation. The scheme does not propose any penalty on lower power generation unsatisfactory performance of the projects. This raises a big question in terms of poor quality of modules to be imported. The implementation of scheme will be made through the Solar Energy Corporation (SEC) of India. Govt. proposes a capacity of the order of 750 MW to 1000 MW under phase 2. The VGF will make available generated solar power at a fixed levelized tariff of Rs.5-6 /unit to discoms. National clean energy fund (NCEF) is proposed to be used to meet the VGF. MNRE shall determine the base tariff at which solar power will be available to discoms. The tariff determination will be based on the levelised tariff published by CERC for FY13-14. Bidders can get a max. VGF on 40% of the benchmark rate.

Draft JNNSM Ph-2 Guidelines


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