State energy dept plans to scrap annuity model in solar projects
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Jaipur: State govt is planning to scrap 4,000 MW solar projects planned under Hybrid Annuity Model (HAM) for solarising agriculture connections. In a recent meeting, energy minister Heeralal Nagar sought opinions about the efficacy of this model in the solar sector after a few stakeholders raised concerns.
Officials present in the meeting said many questioned the logic of introducing HAM in the power sector where there is an assured income. HAM is widely used in the road sector where the toll revenue is uncertain during the initial years. They said risks and returns are usually managed through tariff-based competitive bidding, not annuities. Also, cash flow in power projects is predictable, especially in renewable energy.
Under the HAM model, the govt provides investors 30% of the cost upfront and the rest in seven installments over seven years. After seven years, the projects are transferred to the govt. However, most of the projects under the PM Kusum scheme, intended for solarising the agriculture sector, are set up by the private sector, and the power is supplied at a pre-determined rate of around Rs 3. In these projects, the govt neither invests nor owns the projects but gets power as per the power purchase agreement with them.
"Power project developers are very keen on investing under the HAM model, and the track record of the govt in payment is not very good," said an industry representative. According to sources, while the energy department has initiated the process to cancel the 4,000 MW project, it will go ahead with the 1,000 MW rooftop projects for govt buildings tendered under HAM.
Another industry expert said that when the officials change, the payment to developers under the HAM can become difficult. "There is scope for interference and misinterpretation of certain works involved in the projects, and invariably the payments become the tool to harass the developers," he said.
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