CERC sets Rs 3.36 per kWh tariff for 40 MW Ayodhya solar project

The Central Electricity Regulatory Commission (CERC) has set a project-specific levellised tariff of Rs 3.36 per kWh for a 40 MW solar photovoltaic plant in Ayodhya, Uttar Pradesh. The order dated 26 December 2025 settles the tariff for 25 years from the Commercial Operation Date, while rejecting several claims made for higher costs and departures from normative parameters.

NTPC Green Energy Limited (NGEL) filed the petition under Sections 62 and 79(1)(a) of the Electricity Act, 2003. The petition sought tariff determination for the 40 MW solar project developed under a Memorandum of Understanding with the Government of Uttar Pradesh. Land was allotted following a state cabinet decision. The Uttar Pradesh Electricity Regulatory Commission (UPERC) had approved power procurement by relaxing competitive bidding requirements. A Power Purchase Agreement (PPA) was signed with Uttar Pradesh Power Corporation Limited (UPPCL) on 18 January 2024. The project achieved full Commercial Operation Date (COD) on 31 July 2024. Since COD fell within the control period of the CERC Terms and Conditions for Tariff determination from Renewable Energy Sources Regulations, 2024, these regulations were applied.

The Commission held that tariff determination was governed by Regulations 7 and 8 of the Renewable Energy Tariff Regulations, 2024. It stated that financial and operational norms specified in the regulations would act as ceiling norms, except for capital cost. The tariff was designed as a single part levellised tariff based on the year of commissioning.

The Commission applied the normative debt equity ratio of 70:30 as per Regulation 13, even though NGEL funded the project entirely through equity. Equity beyond 30 %  was treated as a normative loan. Return on Equity was applied at 14 %, grossed up by the Minimum Alternate Tax (MAT) rate of 17.47 %  for the first 20 years and a corporate tax rate of 34.94 %  for the remaining five years, in line with Regulation 16.

Interest on loan was fixed at 10.65%, which is 200 basis points above the average State Bank of India Marginal Cost of Funds-based Lending Rate. Interest on working capital was set at 11.90%, which is 325 basis points above the same rate.

The capital cost was closely examined. Against NGEL’s claim of Rs 532.41 lakh per MW, the Commission approved Rs 503.62 lakh per MW. It did not accept estimated future expenditure for the underground transmission line and bay. Only the actual cost of the completed overhead line was allowed at Rs 9.38 lakh per MW as reimbursable cost, compared to the claim of Rs 25.58 lakh per MW. Land cost included nominal lease rent of Rs 1 per acre per year. The Commission also allowed compensation of Rs 20.71 lakh paid for family relocation as directed by the District Magistrate, while rejecting objections raised by UPPCL.

On operating parameters, the Capacity Utilisation Factor (CUF) was approved at 24.73%, higher than the regulatory minimum of 21%. The Commission declined the proposal for 0.7%  annual module degradation and 1.25%  transmission system unavailability, noting that the Renewable Energy Tariff Regulations 2024 do not provide norms for a module degradation factor. It recorded that any earlier allowance was a one-time exception in special circumstances.

Operation and Maintenance (O&M) expenses of Rs 3.63 lakh per MW per year were approved for the first three years based on the Engineering Procurement and Construction contract. For later years, escalation of 5.25%  was applied, resulting in Rs 3.82 lakh per MW per year in the fourth year instead of the claimed Rs 4.13 lakh per MW per year. A separate claim of Rs 0.22 lakh per MW per year for transmission line O&M was disallowed because there is no provision for this in the regulations. Auxiliary consumption was allowed at a maximum of 0.75%. The request for recovery of the difference between auxiliary power tariff and PPA tariff was held to be governed by PPA terms and not by this tariff order.

Applying a discount factor of 9.05 %  and the approved parameters, the Commission calculated the levellised tariff as Rs 3.36 per kWh for the 40 MW solar project in Ayodhya, against NGEL’s final claim of Rs 3.98 per kWh. The petition was disposed of based on these findings.

The featured photograph is for representation only.