While the central government and most states in India are looking to promote, even obligate, the use of rooftop solar power projects, one state is looking to reduce tariffs for rooftop solar power systems and even impose tax on revenue generated from sale of the electricity generated.

The power utility of the Indian state of Tamil Nadu has approached the state’s electricity regulators asking it to reduce the tariff offered to rooftop solar power systems for consumers and impose an additional tax on the revenue. According to media reports, Tamil Nadu Generation and Distribution Company (TANGEDCO) has proposed to fix the tariff of electricity generated from rooftop solar power systems at 50% of the lowest tariff offered to utility-scale solar power projects in the state.

Several other conditions have also been proposed by the utility. It proposes that consumers be allowed to install rooftop solar power systems up to only 50% of their contracted demand. Perhaps one of the most shocking proposal is introduction of an additional tax on revenue from the power generated by these systems.

At present, there is no cap on the size of rooftop system that can be installed by a consumer. The electricity generated by the system is subtracted from the electricity consumed from the grid and the consumer pays for the net electricity consumption. By reducing the tariff applicable to electricity generated from rooftop systems, the utility would effectively reduce the generation, thus increasing the power bill for consumers.

The utility plans to fix the tariff of rooftop systems to half of the tariff offered to solar power companies in the states. While the media reports are not clear on the exact figure, the tariff could be lower than Rs 2.00/kWh (3.1¢/kWh) as 1.5 gigawatts capacity was recently auctioned to developers at Rs 3.47/kWh (5.4¢/kWh).

Last month, TANGEDCO received massive response to the tender with project developers willing to set up 2.67 gigawatts capacity against the offered 1.5 gigawatts capacity. The bids submitted by the participating companies varied from Rs 3.47/kWh (5.4¢/kWh) to Rs 4.00/kWh (6.2¢/kWh), the maximum allowed bid.

The main reason behind this move is the poor financial health of the utility. It is know to delay payments to wind and solar power developers despite having long-term power purchase agreements with them. Experts are also baffled by this proposal because TANGEDCO loses 19-25% of the electricity while supplying it to end consumers. Rooftop solar power systems would mean near-zero losses of electricity as the point of generation and consumption is the same.

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