Gujarat’s solar flip ups the risk of a larger flop
Right from currency notes, which are payment promises or IOUs issued by a central bank, to complex commitments made by corporations in the course of business, an economy can hum along only if there is a consensus among all commercial actors on one thing: that agreements are inviolable. But what if there is a significant player, one armed with rule-making authority, that starts playing fast and loose with its obligations? It would spell trouble. This being so, it is hard to fathom why state governments in India show such few qualms about going back on their word and tearing up contracts awarded by them. The latest example of a state having reneged on its own deals is Gujarat. In one fell swoop, its power procurement agency cancelled tenders for 700 MW of solar power generation given to a clutch of energy producers, citing lower tariff bids in a subsequent auction. The companies left staring at Letters of Award (LoAs) that might no longer be worth the ink they bear include Vena Energy, Tata Power, ReNew Power and O2 Power.
Last August, these firms had won contracts to put up facilities in Gujarat’s Dholera Solar Park through an auction process that yielded ₹2.78 per unit as the lowest bid for the supply of electric energy to a state-run power grid. In October, Gujarat Urja Vikas Nigam Ltd gave out duly-signed LoAs. The final power purchase pacts were to be inked in January. But that was not to be. In December, an auction for another solar project threw up ₹1.99 per unit as the lowest bid.
