Centre allows renewable developers to cut tariffs after winning tenders

New Delhi: Renewable energy developers can now voluntarily cut tariffs after winning a tender, a move that could help clear about 40GW of unsigned power purchase agreements (PPAs) without reopening the original bids.

The ministry of new and renewable energy (MNRE), in a communication dated 31 July, said renewable energy implementation agencies (REIAs), including the Solar Energy Corp. of India Ltd, NTPC Ltd, SJVN Ltd, and NHPC Ltd, can accept a lower tariff offered by a successful bidder, as long as the developer offers the cut on its own and is not asked or pressured to do so.

In simple terms, developers can offer a lower price after winning a tender, but REIAs and power buyers cannot negotiate for one.

The clarification could give REIAs a way to make stuck projects more acceptable to power distribution companies (discoms), potentially allowing PPAs to be signed without changing the terms or configuration of the original bids.

The move comes as standalone renewable energy projects face a large backlog of unsigned PPAs, while distribution companies (discoms) are signing expensive contracts to procure thermal power. India’s non-fossil power generation capacity has reached 300GW, led by solar power.

Queries mailed to the Union ministry of new and renewable energy remained unanswered till press time.

What changed

In April, MNRE had advised REIAs to discourage post-tender negotiations with developers or end procurers to modify discovered tariffs. The communication dated 31 July also cited Central Electricity Regulatory Commission’s (CERC) observation in 2022 that voluntary reduction in the discovered tariff does not violate the norms.

In its communication, the ministry said it had received a representation seeking clarification on whether the earlier directive applied when a successful bidder itself offered to reduce the discovered tariff after completion of the bidding process.

“It is further clarified that nothing contained in the aforesaid communication dated 06.04.2026 shall preclude a successful bidder from voluntarily offering a reduction in the discovered tariff, suo moto, on its own volition, provided that such reduction is not pursuant to any request, solicitation, negotiation, inducement or direction from the REIA/procuring entity. Such voluntary and unsolicited tariff reduction may be accepted by the concerned REIA and shall not be construed as post-tender tariff negotiation,” the communication showed, as reviewed by Mint.

The April directive barred REIAs or procuring entities from seeking, negotiating or making the execution of project agreements conditional on a lower tariff after the tender.

“Accordingly, REIAs/procuring entities shall not seek, solicit, negotiate, Induce, insist upon, or make execution of the Letter of Award (LoA), Power Purchase Agreement (PPA), Power Sale Agreement (PSA), or allocation of capacity contingent upon any reduction in the discovered tariff,” it said.

The key distinction is who initiates negotiations for price the cut: the developer can do so, but the REIA or procurer cannot.

An official familiar with the developments, who spoke on condition of anonymity, said the provision could give developers a way to make projects viable if market tariffs fall after they win a tender.

“Suppose a successful developer of one particular tender finds that subsequent tenders are witnessing lower tariffs and finds it difficult to get buyers for the power from its project, then he would have the option to offer lower tariff. The developers would at least make some returns, rather than sitting on the awarded capacity and the land unutilized, without any operation and making no money.”

MNRE had also said in its April directive that SECI would be the sole REIA for future tenders.

Clearing the backlog

The clarification could give REIAs a way to reduce tariffs on stuck projects without changing the underlying configuration of projects or reopening the original bidding process, according to experts.

“As unsigned PPAs for plain-vanilla capacities increased, REIAs were attempting to clear the backlog by altering the bid modalities, including through the addition of wind and storage, to create a proposition that would be more acceptable to discoms, given the limited demand for plain-vanilla solar power. However, such an initiative would have required regulatory clearance. There was also a possibility of other players contesting the move on grounds of foul play, as it would involve altering the initial bid conditions and hence, MNRE has give this clarification,” Jatin Arya, director and head–Energy and Infrastructure Ratings, CareEdge Ratings.

“With developers now being given the right only to offer reduced tariffs, the only change that can take place is a reduction in price, which is also in the interest of end consumers and the configuration of the bid, therefore, cannot be altered,” he said.

The Centre has been making efforts to reduce the backlog of unsigned PPAs and boost demand among power distribution companies.

One option considered by the government was to allow developers to exit such projects without invoking their bank guarantees. It also considered waiving transmission charges, adding battery energy storage systems for solar projects, and relaxing regulations and grid connectivity norms for such projects.