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 State-run Gujarat Urja Vikas Nigam Limited (GUVNL) has withdrawn subsidy to small-scale distributed solar projects, affecting about 4000 projects with an aggregate capacity of around 2500 MW signed power.

The purchase price of power produced was fixed at Rs 2.83 per unit which was already far lower than other states like Rajasthan and Maharashtra, where they set Power Purchase Agreements (PPA) tariff rates at higher than Rs 3.15.

In March 2019, the 'Policy for Development of Small Scale Distributed Solar Power Projects' was first announced by the government with the aim of encouraging the distributed generation of solar energy. This scheme was intended to support Prime Minister Narendra Modi's ambitious renewable energy goals.

In effect, distribution generation to Gujarat state power companies was expected to help reduce transmission losses, farmers would get electricity during the day, the environment would benefit and the Center and the State governments would benefit from GST revenue.

As stated in the policy, any eligible entity can set up a solar power plant with capacity ranging from 0.5 MW to 4.0 MW, and supply the solar power produced to the nearest GETCO substation.

An estimated Rs 100 crores have been invested by MSME investors for registration with DISCOM/GEDA to DISCOMs PGVCL, UGVCL, DGVCL, MGVCL so far through advanced charges for transmission line supervision and connectivity. Developers have also invested a total of Rs 1,000 crore and a proposal to invest Rs 10,000 crore has been received.

However, the Gujarat government is now apprehensive about providing the promised subsidies. It has also dampened investor sentiment who are now looking to switch to states that assure higher returns. This will effectually negate the state's effort in incentivising and building a green state.

"Gujarat leads the chart in solar rooftop and ground-mounted as compared to any other state. Continuing the subsidy will help Gujarat retain its lead position, boost investor sentiment and trust in the solar sector. To ensure the momentum of solar in the state, and to safeguard the interest of investors, developers and MSMEs, we hope that the government finds an alternate solution," said Ishver Dholakiya, Founder and Managing Director, Goldi Solar, in a statement.

Industry body ASSOCHAM and other solar associations have also pointed out that these solar power projects will provide employment to more than 30,000 people for 25 years.

"We really need the government to step in and help support the livelihood of the people and create more jobs. There are huge investments involved, and efforts have been made keeping in mind the returns. Projects under this scheme will be completely unviable without subsidies and will leave power producers in the lurch," said Mehul Patel -- President, South Gujarat Solar Association.

"Gujarat has always fostered a conducive environment for the adoption of solar. The situation has created fear among investors, who now want to cancel all the PPAs with GUVNL. The government should intervene in this matter immediately and roll back this decision for not giving subsidies under SSDP," added Kishoresinh Jhala, President of GFSI.