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Delay in renewable energy project? Centre can blacklist companies

New Delhi, February 16, 2023 

Senior executives, however, pointed out that the encashment of bank guarantee in case of default was always part of the tender document issued by central government agencies

Renewable energy companies that fail to meet the commissioning date of projects awarded by central government agencies will be blacklisted from future government tenders.

In an official circular, the Union Ministry of New and Renewable Energy (MNRE) said that bank guarantees will be encashed and project developers blacklisted if the project is not constructed up until its due date.

“If any renewable energy project is not completed within the prescribed date of completion, its bank guarantee should be encashed and the developer blacklisted after asking him to show cause. The blacklisting will be for a period of three to five years. These are in accordance with the general financial rules of the government and apply to all tenders/bids,” read the notice, reviewed by Business Standard.

The notice has been sent to Solar Energy Corporation of India (SECI), a statutory body under MNRE, responsible for tendering renewable energy projects, state-owned power generators NTPC and NHPC which also offer renewable projects to private companies.

Senior executives, however, pointed out that the encashment of bank guarantee in case of default was always part of the tender document issued by central government agencies.

“Tenders by government agencies also have the provision to blacklist a firm after repeated and serious defaults,” said an executive.

In the past two years, MNRE had offered renewable energy project developers to apply for extension in the commissioning date owing to the impact of the Covid-19 pandemic. Several companies had also applied for extension, citing supply-chain disruptions from China, absence of allied transmission infrastructure, and land issues.

However, as India aims to achieve 500 gigawatt (Gw) of renewable energy capacity by the end of this decade, sector watchers feel this move is to push project developers to step on the gas.

At the current renewable (solar, wind, small hydropower, and biomass) capacity of 121 Gw, the Centre has failed to achieve its earlier stated target of 175 Gw capacity by 2022. There is currently no government database which tracks project defaults in the renewable energy sector.

The latest monthly report of the renewable energy project monitoring division of the Central Electricity Authority of India shows close to 2.6 Gw of under-construction solar power projects and 2.7 Gw of wind power projects have applied for extension with SECI.

Currently, 70 Gw of projects awarded by central state government agencies are under construction. Of these, solar has the lion’s share of 55 Gw, followed by wind of 9 Gw. The balance is biomass, small hydropower, and solar-wind hybrid projects.

India has committed to source 50 per cent of its electricity needs from non-fossil fuel sources (including large hydropower) by 2030. The commitment is part of the officially submitted nationally determined contributions to the United Nations. According to several public statements, the expected quantity of renewable energy would be 500 Gw by the end of this decade.

[The Business Standard]

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