No fear of safeguard duty at GUVNL auction, as L1 bid comes in at Rs 2.44

It was back in April this year when Gujarat Urja Vitaran Nigam Limited (GUVNL), the key discom in Gujarat, surprised everyone (almost) by cancelling the 500 MW tender for PV energy in Gujarat. The auction, that was done for the entity to meet its Renewable Purchase Obligations (RPO), was cancelled citing the high difference in prices between the previous auction and the lowest bidder  on this one, Kalthia Engineering and Construction, which had quoted Rs 2.98 per unit. Incidentally, in the fresh auction, Kalthia Engineering has managed to drop rates to RS 2.88 only.

So clearly the decision to re-tender has worked in this case, although six months have also been wasted, a period that may not sound too much when considering the 25 year PPA’s that are usually signed for agreements like these. Interestingly, one of the factors that had allegedly led to high bids was developers factoring in or trying to, factor, safeguard duty impact on their bids.

Now that the safeguard duty has been announced and implemented, the lower rates only serve to highlight the obvious truth. Business hates uncertainty far more than regressive policies, as long as they are consistent.

A total of 1925 MW worth of bids were received for this tender. 13 bidders had submitted technical bids out of which nine participated in the financial bidding. Tariffs have ranged between a high of ₹2.88 /kWh and a low of ₹2.44/kWh.

With these rates banked, pressure is bound to remain on developers for other states and future tenders. With the draft amendments to the Electricity act mandating higher Renewable Purchase Obligations along with heavy fines for non-compliance, the demand is bound to be strong now. The question is, will developers be able to meet expectations of consistently low prices. As of now, it does look that developers quoting outside the range of Rs 2.44 to Rs 2.75 or so will struggle to  get significant wins under their belt.  That’s the kind of certainty they may not actually like!