F. No. 53/15/2016 -WE Ministry of New & Renewable Energy Evaluation of Generation Based Incentives Scheme for Wind Power Projects The GBI scheme was initially introduced in 11th Plan on 17.12.2009 with the approval of the Cabinet for taking up 4,000 MW in 11th Plan. Under that scheme a GBI of Rs. 0.50 per kWh with a ceiling of Rs. 0.62 crore per MW was provided to wind power project. The incentive was to be availed in not less than 4 years and in maximum of 10 years with an annual ceiling of Rs. 15.5 lakh per MW in first 4 years. IREDA was designated as the implementing agency for the Scheme. The scheme was further extended for the 12 th Plan period with increased ceiling of Rs. 1.0 crore per MW. Under GBI scheme over 7000 MW capacity has already been registered. 2. IREDA has undertaken an evaluation of the GBI Scheme through CRISIL. CRISIL has submitted its final report on evaluation of the GBI scheme. The report has been placed on the website of the Ministry for comments/suggestions/views of the stakeholders. 3. The comments/suggestions/views on the GBI evaluation report may please be sent through email (preferably in word format) by 15 December 2016 to: Shri J. K. Jethani Scientist-D Ministry of New & Renewable Energy Blcok-14, CGO Complex, Lodhi Road New Delhi-110003 Tel/Fax- 24362728 Email: [email protected]
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F. No. 53/15/2016 -WE
Ministry of New & Renewable Energy
Evaluation of Generation Based Incentives Scheme for Wind Power Projects
The GBI scheme was initially introduced in 11th Plan on 17.12.2009 with the
approval of the Cabinet for taking up 4,000 MW in 11th Plan. Under that scheme a GBI of
Rs. 0.50 per kWh with a ceiling of Rs. 0.62 crore per MW was provided to wind power
project. The incentive was to be availed in not less than 4 years and in maximum of 10 years
with an annual ceiling of Rs. 15.5 lakh per MW in first 4 years. IREDA was designated as
the implementing agency for the Scheme. The scheme was further extended for the 12th
Plan
period with increased ceiling of Rs. 1.0 crore per MW. Under GBI scheme over 7000 MW
capacity has already been registered.
2. IREDA has undertaken an evaluation of the GBI Scheme through CRISIL. CRISIL
has submitted its final report on evaluation of the GBI scheme. The report has been placed on
the website of the Ministry for comments/suggestions/views of the stakeholders.
3. The comments/suggestions/views on the GBI evaluation report may please be sent
through email (preferably in word format) by 15 December 2016 to:
2.2 Objective of study ....................................................................................................................................... 11
2.3 Scope of work ............................................................................................................................................. 11
3. Approach and methodology ............................................................................................................................ 13
3.1 Scope of work ............................................................................................................................................. 13
4.1 Renewable energy in India ......................................................................................................................... 15
4.2 Wind energy in India ................................................................................................................................... 15
4.3 Incentive schemes for wind sector .............................................................................................................. 16
5. Assessment of GBI scheme ............................................................................................................................. 19
5.1 Progress and performance of GBI scheme ................................................................................................ 19
5.1.1 Achievement of objectives ............................................................................................................. 20
5.1.2 Achievement of targets .................................................................................................................. 22
6.3.4 Third Party Sale ............................................................................................................................. 33
3
6.4 Recommendation on Incentive Level and Cap ........................................................................................... 33
7. Assessment of implementation procedure .................................................................................................... 35
8. Other key aspects ............................................................................................................................................. 37
8.1 Impact of GST and DTC ............................................................................................................................. 37
9. Conclusion and recommendations ................................................................................................................. 38
4
Table of figures
Figure 1: Capacity additions and projects registered (MW) under GBI Phase II .......................................................... 6
Figure 2: Three methodologies used for determination of appropriate level of GBI ..................................................... 7
Figure 4: Incentive schemes in wind energy .............................................................................................................. 16
Figure 5: Wind installed capacity trend in India .......................................................................................................... 19
Figure 6: Objectives of GBI scheme ........................................................................................................................... 20
Figure 7: Capacity additions and projects registered under GBI ................................................................................ 21
Figure 8: Share of states in projects availing GBI ...................................................................................................... 21
Figure 9: Three methodologies for determination of required GBI ............................................................................. 23
Figure 10: Repowering potential in India .................................................................................................................... 29
List of tables
Table 1: Treatment of GBI benefits .............................................................................................................................. 6
Table 3: Estimated financial impact on exchequer from PBI scheme under FIT and bidding route .......................... 10
Table 4: Estimated financial impact on exchequer from GBI scheme-Repowering & wind-solar hybrid projects ...... 10
Table 5: Installed power capacity, as on July 30, 2016 .............................................................................................. 15
Table 6: State-wise installed wind power capacity ..................................................................................................... 15
Table 7: Weighted average SERC parameters .......................................................................................................... 24
Table 8: Various parameters used during the calculation .......................................................................................... 24
Table 9: Appropriate level of GBI based on Revenue Neutrality ................................................................................ 25
Table 10: Appropriate level of GBI based on NPV equal to Zero ............................................................................... 26
Table 11: Appropriate level of GBI based on target Equity IRR ................................................................................. 26
Table 12: Proposed PBI incentive under FIT and competitive bidding route ............................................................. 27
Table 13: Estimated financial impact on exchequer ................................................................................................... 28
Table 14: Assumptions for computation of GBI incentive for repowering projects ..................................................... 30
Table 15: Assumptions for computation of GBI incentive for wind-solar hybrid projects ........................................... 31
Wind energy is the fastest growing renewable energy source in India. With an installed capacity of close to 28 GW,
it constitutes about 61% of the country’s installed renewable power capacity.
Commercial wind power projects in India are promoted through fiscal and promotional incentives. The main driving
force for initial development of the wind sector has been the provision of 80% accelerated depreciation (AD). Later,
to broaden the investment base through entry of large independent power producers (IPPs) and attract foreign direct
investment (FDI), the Ministry of New and Renewable Energy (MNRE) introduced the Generation Based Incentive
(GBI) scheme in December 2009. The objective of the scheme was to provide level playing field to IPPs and also
promote increased generation and efficiency in installations.
The GBI scheme, which was withdrawn on March 31, 2012, was reintroduced on September 4, 2013 retrospectively,
with the following terms and conditions:
Under phase II of the scheme, GBI is being provided to wind electricity producers @ Rs 0.50 per unit of
electricity fed into the grid for a period of not less than four years and a maximum period of 10 years, with a
cap of Rs 10 million per MW
The total disbursement in a year cannot exceed one-fourth of the maximum limit of the incentive, i.e. Rs 2.5
million per MW per annum during the first four years
The scheme will be applicable for the entire Twelfth Five-Year Plan period, i.e. up to March 2017
With the GBI scheme nearing its deadline of March 31, 2017, the Indian Renewable Energy Development Agency
(IREDA) and MNRE have facilitated this study to evaluate the performance of the GBI scheme, in terms of meeting
its objectives and targets, its impact on the wind power sector, and identifying and addressing any relevant issues.
To conduct this assessment, financial model was prepared for a typical IPP in various states that includes the impact
of variation in FIT in states on financial viability of the wind power project. Beside, a consultative approach has been
used, which comprises discussions with stakeholders, including MNRE, IREDA, developers of wind power projects,
turbine manufacturers and wind associations. Concern of DISCOMs on account of relatively higher cost of wind
power, compliance of RPO, as well as impact on retail tariffs were also factored in.
The key findings from this study are:
Performance of GBI scheme: Although the performance of GBI phase II, in terms of capacity addition, has been
modest, with a total addition of 5,7621 MW as against the target of 15,000 MW, the GBI scheme has had a positive
impact on the wind power sector, and has been appreciated by wind power developers/ investors and other
stakeholders. It remains one of the key incentive that has driven investments in the sector especially from number of
IPPs who are not availing AD benefit but doing project finance.
1 Source: IREDA; as on March 31, 2016
6
Figure 1: Capacity additions and projects registered (MW) under GBI Phase II
In terms of approach, it has rightly set a transition from investment- or capital-linked incentive to outcome- or
generation-linked objective. The scheme has been successful in improving wind capacity utilization factor
(CUF) levels in the country. The same can be observed from increase in normative CUF levels considered
by Regulatory Commissions over the last 5 years such as Maharashtra (CUF increased from 20% to 22%),
Gujarat (CUF increased from 23% to 24.5%) and Karnataka (CUF increased from 24.5% to 26%)
It has lead on improved technology advancement with better hub-height that has eventually lead to higher
generation or performance.
It has also helped in financial closure by providing comfort to lenders of assured cash flow from the central
government. In fact, investors have cited positive impact the GBI scheme has had, in terms of availing
financial closure for wind projects during times when there have been payment delays by utilities.
Factors affecting GBI offtake: Projects registered under the GBI scheme, as a percentage of total wind projects
commissioned, reduced to less than 40% in 2015-16 from a high of 83% in 2012-13.
In Tamil Nadu and Karnataka, investors preferred alternative offtake options, such as group captive /captive/
third-party models, which offer better returns and financial viability of the project. This lowered the percentage
of projects registered under GBI-sale to distribution companies (discoms).
Also impacting GBI offtake is reluctance by discoms in signing fresh power purchase agreements (PPAs) in
key wind states, such as Rajasthan and Maharashtra. This lowered the share of projects under GBI in 2015-
16.
TREATMENT OF GBI BENEFITS- Considering the ultimate objective of GBI scheme is to benefit the end consumers
and also promote investments in wind sector, there are two approaches for treatment of GBI benefit
Table 1: Treatment of GBI benefits
Options GBI Beneficiary Rationale
1 Investor
1) Provide level playing field with AD benefit
2) Compensate for lesser FIT vis-à-vis submitted
cost of generation as well as to overcome
impact on retail tariffs
1410 17021325 1325
290376 986
2098
2012 -13 2013 -14 2014 -15 2015 -2016
Registered under GBI Other projects not registered under GBI
7
Options GBI Beneficiary Rationale
3) To promote quality investments through
adoption of superior technology as well as
higher generation in the wind sector
4) Unfulfilled target of 15000 MW
2 Discom
1) To incentivize discoms to assure that they
execute PPA and move towards non-solar
RPO compliance, thereby helping in increased
capacity addition in the wind sector
2) To compensate discoms for comparatively
higher cost of wind power over APPC cost,
thereby also helping timely payment to the
investors
3) To help in reducing impact on the retail
consumer tariffs.
DETERMINATION OF APPROPRIATE LEVEL OF GBI: The appropriate level of GBI is arrived at considering both
the options-a) GBI offered to investor b) GBI offered to Discom.
a) Option 1- GBI offered to investor
The analysis of appropriate level of GBI has been done through 3 methodologies as shown below.
Figure 2: Three methodologies used for determination of appropriate level of GBI
Revenue neutrality to AD: Revenue neutral GBI has been calculated considering the levelised value of the
total equity cash flow (post tax), thus taking cognizance of the tax benefit of AD for each year. According to
revenue neutrality, the required GBI level is coming to be in the range of Rs 0.51 per unit.
Based on NPV equal to zero: In this second methodology, the required GBI has been calculated based
upon keeping Net Present Value of equity cash flows (post tax) equal to zero. As per this methodology, the
required GBI level is coming to be Rs 0.48 per unit.
Based on target equity IRR: In this third methodology, the required GBI level has been calculated keeping
equity IRR (post tax) is in the range of 14%-16%. As per this methodology, the required GBI level is coming
to be Rs 1.08/kWh, Rs 1.28/kWh and Rs 1.48/kWh for equity IRR of 14%, 15% and 16% respectively.
Repowering Projects: It is suggested to offer GBI benefit for repowered wind projects. Appropriate GBI has been
calculated considering the difference between levellised cost of generation from repowered project and the weighted
average offtake tariff. Accordingly, GBI benefit to investor is coming to be Rs 0.66 per unit.
Determination of required GBI level
Based on Revenue Neutrality to AD
Based on NPV equal to zero
Based on target Equity IRR
8
Wind-Solar hybrid projects: It is suggested to offer GBI benefit for wind solar hybrid projects. Appropriate GBI has
been calculated considering the difference between levellised cost of generation from wind-solar hybrid project and
weighted average offtake tariff. Accordingly, GBI benefit to investor is coming to be Rs 0.61 per unit.
Incentive Cap: It is suggested that there should not be any further annual or overall cap. This has been explained
in the points below.
In case any cap is imposed to the scheme then it will reduce the availability of GBI for the 10 years period
as assumed in the calculation. This, in turn, would lead an increase in overall GBI requirement.
The removal of cap is also supported from one of the objective of the scheme- to incentivize higher generation
efficiency. Annual or overall cap to the scheme would restrict the efficiency by limiting the amount of
generation that would be eligible for GBI. This would be in conflict to the scheme objective itself.
b) Option 2- GBI offered to discom
One of the key challenge faced by the wind sector is lack of non-Solar RPO compliance (including in states with no
wind potential) as well as recently observed reluctance of discoms to procure wind power due to their weak financial
health or due to its potential impact on the retail level tariffs for consumers. Therefore, suitable mechanisms need to
be developed to use GBI to encourage discoms to procure wind power, make timely payments and also prevent
forced backing down of wind power. This procurement incentive may be provided to the DISCOM till such time utilities’
payout for wind power is greater than the marginal cost of conventional power or average power purchase cost as
well as its likely impact on the retail tariffs & its financial health2.
Further, the GBI scheme was launched with an objective to promote generation efficiency in the wind sector when
the sector was struggling with poor efficiency levels, which the GBI scheme has been successful in addressing and
also promoting investment that are through project finance3.
Therefore, there is a need to shift from generation based incentive to a procurement based incentive by incentivizing
utilities to comply with RPO targets including states with lack of RE resources, Accordingly, a suitable procurement-
based incentive (PBI) is structured to help reduce the purchase cost of wind power for states. Such a change will
enhance transparency, facilitate timely payment to generators and ease out the administration of the incentive with
the central government would only need to deal with the discoms than with investors. It is suggested that apart
from wind repowering and wind solar hybrid power projects, which are still in nascent stage of promotion,
conventional wind power sale to utilities (under both FIT as well as competitive route) should be covered
under the PBI scheme i.e. incentive should be offered to utilities rather that wind investors.
Determination of appropriate level of PBI: With the objective to incentivize utilities to meet RPO targets and ensure
timely payments to investors, the appropriate level of achievement-linked PBI is arrived by computing the difference
between lowest cost of wind generation (lowest wind feed-in-tariff (FIT) of Rs 4.16/kWh) and national average power
procurement cost (Rs 3.40/kWh4). Therefore, an achievement-linked PBI is proposed to be offered to utilities, based
on the following achievement levels:
Table 2: Proposed PBI incentive
S. no. Achievement vis-à-vis state wind targets (MW) specified by MNRE Procurement-based incentive
1 85% and above (till 2017-18) 75 paisa/kWh
2 Below 85% and up to 60% (till 2017-18) 50 paisa/kWh
3 Below 60% (till 2017-18) 25 paisa/kWh
2 Financial health is likely to improve by 2019-20 post implementation of UDAY scheme and its operational targets and benefits 3 The same can be observed from increase in normative CUF levels considered by Regulatory Commissions over the last 5 years such as
Maharashtra (CUF increased from 20% to 22%), Gujarat (CUF increased from 23% to 24.5%), and Karnataka (CUF increased from 24.5% to 26%)
4 http://www.cercind.gov.in/2015/orders/SO15.pdf
9
In order to capture inflation cost under national level average power procurement cost, PBI incentive will be computed
on an annual basis. A multiplier (APPC n-1/APPC n) will be computed, based on Central Electricity Regulatory
Commission (CERC) computation of national level average power procurement cost each year. For e.g., in case
CERC determines average cost of power procurement as Rs 3.60/kWh, the multiplier will be 0.94, i.e. 3.40/3.60.
Accordingly, the PBI incentive will be 0.71 for 2018-19 (0.94 multiplied by 0.75 under the first performance category.
Eligibility criteria: The PBI incentive should be offered under both procurement modes, i.e. procurement under FIT
route, and procurement through competitive bidding route. Further, all new wind projects, including standalone wind
projects, wind-solar hybrids and repowering projects, should be eligible under the scheme.
The payment of PBI incentive to utilities will be built in, with following pre-conditions:
Utilities should clear pending invoices for wind power projects to be eligible
Utilities should submit documentary evidence for timely payment to wind generators, along with the PBI claim
application, monthly
Moreover it is clarified that the PBI incentive should not be monetized by utilities and banks for financing
purpose
Control period for PBI scheme: It is suggested that the PBI scheme will be applicable for a period of 3 years i.e.
till 2019-20, with an incremental wind capacity target of 15 GW. Further, such PBI incentive will be paid for a period
of 5 years for the contracted capacity. It is expected that the utilities financial and operational health will significantly
improve within the next 3 year period with the help various government initiatives including implementation of UDAY
scheme. The scheme will be reviewed after a period of 3 years and re-evaluated depending on RPO targets met,
utilities financial situation etc.
Inclusion of competitive bidding route (both intra and inter-state sale) under the PBI/GBI scheme: With
Ministry notifying guidelines for introduction of competitive bidding for procurement of 1000 MW wind projects by non-
windy states, it is important to evaluate the need for GBI under competitive bidding route. Considering the fact that
under competitive mode, the distribution company is the end procurement party, it is suggested that GBI/PBI scheme
should be applicable under competitive bidding mode also. Therefore, along with offering PBI incentive to utilities
under FIT regime, similar PBI incentive should be offered to procuring utility under competitive bidding route.
Captive consumption and Third party sale: It is suggested to continue third party sale as ineligible for GBI scheme
as the generators would be selling this power at higher/ appropriate tariffs, and thus making considerable/ reasonable
profits.
Summary of Treatment of GBI/PBI scheme
Under FIT and competitive bidding route-PBI incentive to be offered to procuring discoms based on table
2 above (both under FIT as well as competitive bidding route).
Under repowering and wind solar hybrid power projects-GBI payment to be given to wind investor
o For repowering projects-GBI incentive is worked out at Rs 0.66 per unit
o For wind-solar hybrid projects- GBI incentive is worked out at Rs 0.61 per unit
Captive and third party sale-Continue to remain ineligible under GBI/PBI scheme
Impact on exchequer: The financial impact of the PBI scheme on the exchequer will depend on actual performance
of utilities, in terms of compliance with wind targets. Under base case of 100% compliance, the cumulative financial
impact is estimated at Rs 10276 crore.
10
Table 3: Estimated financial impact on exchequer from PBI scheme under FIT and bidding route
Acc. Depreciation (%) % 40% (plus additional 20% in first year)
6.1.1 Based on Revenue Neutrality
The revenue neutrality requirement indicates that the total value of GBI is capped at the equivalence of the tax benefit
in case of accelerated depreciation (AD). Thus the government does not spend/gain any additional revenues in case
of GBI as compared to AD. Revenue neutral GBI has been calculated considering the levelised value of the total
equity cash flow (post tax), thus taking cognizance of the tax benefit of AD for each year.
The table below shows the comparison of required GBI levels based on revenue neutrality to AD, as per both- the
survey as well as the CERC Zones. A key assumption in the analysis is that a project opting for AD route is availing
balance sheet financing wherein the other businesses of the company is in position to absorb the tax benefit due to
accelerated depreciation. On the other hand, a project opting for GBI route is assumed to be availing project financing.
Table 9: Appropriate level of GBI based on Revenue Neutrality
Category GBI for AD neutrality
SERC/CERC Rs per unit
SERC 0.51
CERC
Zone-1 0.64
Zone-2 0.58
Zone-3 0.51
Zone-4 0.43
Zone-5 0.40
The key inferences from the above analysis are:
Based on revenue neutrality to AD, the required level of GBI is coming to be in the range of Rs 0.40 per unit
to Rs 0.64 paisa/unit
26
6.1.2 Based on NPV equal to zero
The NPV of equity cash flow without GBI/AD benefit is coming to be negative Rs 40.38 lakhs which is an unwanted
situation from project viability perspective. Accordingly, in this second methodology, the required GBI has been
calculated based upon keeping NPV equal to zero.
The table below shows the comparison of required GBI levels based on NPV equal to zero, as per both- the SERC
as well as the CERC Zones.
Table 10: Appropriate level of GBI based on NPV equal to Zero
Category Project IRR
(Pre Tax)
Project IRR
(Post Tax)
Equity IRR
(Pre Tax)
Equity IRR
(Post Tax)
NPV GBI
SERC/CERC % % % % Rs Lakhs Rs per unit
SERC 13.73% 12.09% 14.13% 11.26% 0.00 0.48
Zone-1 15.08% 13.24% 16.43% 13.23% 43.18 -
Zone-2 15.08% 13.24% 16.43% 13.23% 43.18 -
Zone-3 15.08% 13.24% 16.43% 13.23% 43.18 -
Zone-4 15.08% 13.24% 16.43% 13.23% 43.18 -
Zone-5 15.08% 13.24% 16.43% 13.23% 43.18 -
GBI required for NPV equal to zero 0.48
The key inferences from the above analysis are:
Based on NPV (of equity cash flows- post tax) equal to zero, the required level of GBI is coming to be Rs
0.48 per unit at SERC level
Even at this GBI level of Rs 0.48 per unit, the equity IRR (post tax) is coming to be 11.26%.
It is to be highlighted here that this value of required GBI (Rs 0.48 per unit) is due to inadequate wind tariffs
in States. This gets substantiated by the fact that there is no requirement of GBI benefit considering CERC
specified tariff and parameters.
6.1.3 Based on Target Equity IRR
In this third methodology for calculating the required level of GBI, the approach of target equity IRR has been used.
The target equity IRR gauges the return to the investor on the equity put into a project. It is to be mentioned here that
in present scenario in India, the investors are generally willing to invest only if the equity IRR (post tax) is in the range
of 14%-16% or higher.
The table below shows the comparison of required GBI levels based on target equity IRR (post tax), as per both-
SERC as well as the CERC Zones.
Table 11: Appropriate level of GBI based on target Equity IRR
Category GBI (Rs per unit) corresponding to Equity IRR
(post tax)
SERC/CERC EIRR-14% EIRR-15% EIRR-16%
SERC 1.08 1.28 1.48
Zone-1 0.23 0.50 0.77
27
Category GBI (Rs per unit) corresponding to Equity IRR
(post tax)
SERC/CERC EIRR-14% EIRR-15% EIRR-16%
Zone-2 0.22 0.45 0.68
Zone-3 0.18 0.40 0.60
Zone-4 0.15 0.33 0.50
Zone-5 0.13 0.30 0.47
As evident from the above table, the required GBI level based on target equity IRR is coming to be higher than those
calculated as per the earlier two methodologies. The required GBI level in this case is in the range Rs 1.08 to Rs
1.48 per unit in case of SERC parameters and Rs 0.13 to Rs 0.77 per unit in case of CERC parameters. Similar to
the earlier methodology, the required GBI level in this case too highlights the inadequacy of wind tariffs in States.
6.2 Option 2-GBI benefit to discom
One of the key challenge faced by the wind sector is lack of non-Solar RPO compliance (including in states with no
wind potential) as well as recently observed reluctance of discoms to procure wind power due to their weak financial
health or due to its potential impact on the retail level tariffs for consumers. Therefore, suitable mechanisms need to
be developed to use GBI to encourage discoms to procure wind power, make timely payments and also prevent
forced backing down of wind power. This procurement incentive may be provided to the DISCOM till such time utilities’
payout for wind power is greater than the marginal cost of conventional power or average power purchase cost as
well as its likely impact on the retail tariffs & its financial health8.
Further, the GBI scheme was launched with an objective to promote generation efficiency in the wind sector when
the sector was struggling with poor efficiency levels, which the GBI scheme has been successful in addressing and
also promoting investment that are through project finance9.
Therefore, there is a need to shift from generation based incentive to a procurement based incentive by incentivizing
utilities to comply with RPO targets including states with lack of RE resources, Accordingly, a suitable procurement-
based incentive (PBI) is structured to help reduce the purchase cost of wind power for states. Such a change will
enhance transparency, facilitate timely payment to generators and ease out the administration of the incentive with
the central government would only need to deal with the discoms than with investors. With the objective to
compensate discoms for the comparatively high cost of wind power over average power purchase cost (APPC cost),
the appropriate level of GBI benefit is arrived at by computing the difference between lowest cost of wind generation
(lowest wind FIT of Rs 4.16/kWh) and national level average power procurement cost (Rs 3.40/kWh10). Therefore,
an achievement-linked PBI is proposed to be offered to utilities, based on the following achievement levels:
Table 12: Proposed PBI incentive under FIT and competitive bidding route
S. no. Achievement vis-à-vis state wind targets (MW) specified by MNRE Procurement-based incentive for 2017-18
1 85% and above (till 2017-18) 75 paisa/kWh
2 Below 85% and up to 60% (till 2017-18) 50 paisa/kWh
3 Below 60% (till 2017-18) 25 paisa/kWh
8 Financial health is likely to improve by 2019-20 post implementation of UDAY scheme and its operational targets and benefits 9 The same can be observed from increase in normative CUF levels considered by Regulatory Commissions over the last 5 years such as
Maharashtra (CUF increased from 20% to 22%), Gujarat (CUF increased from 23% to 24.5%), and Karnataka (CUF increased from 24.5% to 26%)
10 http://www.cercind.gov.in/2015/orders/SO15.pdf
28
In order to capture inflation cost under national level average power procurement cost, PBI incentive will be
computed on an annual basis. A multiplier of APPC n-1/APPC n will be computed, based on CERC computation of
national level average power procurement cost each year. For e.g., in case CERC determines average cost of power
procurement as Rs 3.60/kWh, the multiplier will be 0.94, i.e. 3.40/3.60. Accordingly, the PBI incentive will be Rs 0.71
/kWh for 2018-19 (0.94 multiplied by 0.75) under the first performance category.
6.2.1 Eligibility for availing PBI incentive
The PBI will be offered under both procurement modes, i.e. procurement under FIT route, and procurement through
competitive bidding route. Further, all new wind projects, including standalone wind projects, wind-solar hybrids and
repowering projects, should be eligible under the scheme.
The payment of PBI incentive to discoms will be built in with the following pre-conditions:
Utilities should clear pending invoices for wind power projects to be eligible
Utilities should submit documentary evidence of timely payments to wind generators along with the PBI claim
application on a monthly basis
Moreover it is clarified that the PBI incentive should not be monetized by utilities and banks for financing
purpose
6.2.2 Control period of PBI scheme
The PBI scheme will be operational for a period of 3 years i.e. till FY 2019-20. Such PBI incentive will be paid for a
period of 5 years for the contracted capacity during the control period. It is expected that the utilities financial and
operational health will significantly improve within the next 3 year period with the help various government initiatives
including implementation of UDAY scheme. The scheme will be reviewed after a period of 3 years and re-evaluated
depending on RPO targets met, utilities financial situation etc.
6.2.3 Impact on exchequer
The financial impact of the PBI scheme on the exchequer will depend on actual performance of utilities, in terms of
compliance with wind targets. Under base case of 100% compliance, the cumulative financial impact is estimated at
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CRISIL Infrastructure Advisory is a leading advisor to regulators and governments, multilateral agencies, investors, and large public and private sector firms. We help shape public policy and enable infrastructure development. Our services span a wide array of infrastructure development activities. Our work in the areas of policy formulation, regulation, design and implementation of public-private partnership (PPP) frameworks and infrastructure financing mechanisms helps create a vibrant ecosystem for infrastructure development. Our services at the project level include bid process management, valuations and due diligence to enable investment decisions. We are known for our core values of independence and analytical rigour combined with deep domain expertise. Our teams have expertise across the complete range of infrastructure sectors - urban development, energy, transport and logistics, natural resources, education, and healthcare. We have a rich understanding of PPP and financing related issues. We operate in India and 22 other emerging economies in Asia, Africa, and the Middle East. CRISIL Infrastructure Advisory is a division of CRISIL Risk and Infrastructure Solutions Limited, a wholly owned subsidiary of CRISIL Limited.
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Last updated: April 2016
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