NEW DELHI: India’s rapidly growing renewable energy capacity, a major achievement of the Modi government, faces a serious slowdown as investors are disappointed by the unrelenting focus on reduction of tariffs and multiple cancellation of bids after auctions. Central and state agencies have together scrapped solar tenders of close to 7,000 MW in the past year as authorities hanker after cheaper tariffs. Solar and wind energy tariffs hit rock bottom in 2017, with competitive bidding throwing up prices of Rs 2.44 and Rs 2.43 per unit, respectively. With tariffs from renewable energy sources having reached grid-parity and becoming cheaper than thermally generated power, the government is now not ready to accept anything above Rs 3 per unit.Following the multiple cancellation of bids before the letter of award is issued, the dependability of the issuing authorities has become questionable, executives told ET on condition of anonymity. “The sanctity of power purchase agreements (PPAs) is gone. What is the point of conducting auctions when you are cancelling tariffs even within the range of what the government has allowed?” asked the executive of a solar company whose tender was recently cancelled One of the largest potential investors in India’s solar segment, SB Energy, backed by Japan’s SoftBank, lost 1,350 MW of project capacity because the authorities were not satisfied with the prices discovered in the bidding process. The government also cancelled a 2,000 MW-bid submitted by NYSE-listed Azure Power for its largest, and first-ever manufacturing-linked solar tender. (See ET January 23 edition.) The latest addition to the list is a solar tender called by the Gujarat Urja Vikas Nigam Ltd. to develop 700 MW of project capacity. The tender, bagged by SB Energy, France’s Engie and Finland’s Fortum, was cancelled because the Gujarat government did not find the tariffs quoted between the range of Rs 2.84 and Rs 2.89  Global investors are disappointed that despite India’s fantastic vision of 175 GW capacity addition by 2022, the government is not able to align its policies with them,” the executive of a leading renewable energy firm said. 
The increase in costs is attributed to factors driven by the government, the executive pointed out. “All the cost increase by 30-40 paise per unit – on account of safeguard duty, rupee depreciation, rising interest rates – has nothing to do with developers.” While the government focuses on tariffs, the quality of projects may be taking a hit. “Nobody is looking at the quality and reliability of projects for 25 years (the duration of the PPA). They are only focussing on reducing tariffs,which will eventually come down anyway as technological advances are made,” one of the executives said. Frequent tender cancellations, while damaging the sanctity of PPAs, are at the same time arbitrary and fuel disconnect between the industry and the government, experts said. “The trend is damaging as it shows that discoms’ tariff expectations are getting entrenched and removed from reality,” said Vinay Rustagi, managing director at Bridge to India, a consulting and knowledge services provider in renewable energy market. 
India needs over $50-billion private investment to achieve the government’s 175 GW target, the Ministry of New and Renewable Energy has estimated. “But other countries are also competing hard to attract capital and we fear that the government is sending a negative signal to investors. International capital can be fickle and once turned away, it would be extremely hard to attract these investors back to India,” Rustagi added