India’s Ministry of New and Renewable Energy (MNRE) has issued amendments to the Central Public Sector Undertaking (CPSU) Scheme Phase-II for setting up 12,000 MW of grid-connected solar power projects with viability gap funding (VGF) support. These projects would be set up by government producers for self-use or use by government entities, either directly or through distribution companies. As per the amendments, the power produced by these projects can be used on payment of mutually agreed usage charges of not more than Rs 2.45 per unit, instead of the earlier Rs 2.80 per unit. This shall be exclusive of any other third-party charges like wheeling and transmission charges and losses, point of connection charges and losses, cross-subsidy surcharge, State Load Despatch Centre or Regional Load Despatch Centre charges.

To cover the cost difference between the domestically produced solar cells and modules and imported solar cells and modules, VGF shall be provided under the scheme. While the maximum permissible VGF has been kept at Rs 5.5 million per MW, the actual VGF to be given to a government producer under the scheme would be decided through bidding using VGF amount as a bid parameter to select project proponent. The maxim permissible VGF was earlier Rs 7 million per MW. The maximum permissible VGF amount will also be reviewed from time to time by MNRE, and will be reduced if the cost difference comes down. VGF will be released in two tranches. 50 per cent of the VGF will be released on award of contract to the EPC contractor, while the remaining 50 per cent on successful commissioning of the full capacity of the project

The solar power projects under this scheme shall be commissioned within a period of 30 months from the date of letter of award, which has been extended from the earlier period of 24 months. However, in order to expedite the implementation of the scheme and to give impetus to domestic solar PV manufacturing, a shorter timeline can also be specified by MNRE.