TGERC Caps Solar Tariff Cut At 6 Paise Per Unit After GST Reduction In Telangana

The Telangana Electricity Regulatory Commission (TGERC) has partially allowed a joint petition filed by Telangana’s distribution companies, TGSPDCL and TGNPDCL, concerning the impact of reduced Goods and Services Tax (GST) on solar power projects under Component-A of the PM-KUSUM scheme.

In its order dated September 28, 2026, TGERC recognized the reduction in GST on specified renewable energy devices as a valid Change in Law event under the Power Purchase Agreements (PPAs). However, the Commission rejected the distribution companies’ proposal to reduce the fixed tariff from ₹3.13/kWh to ₹2.98/kWh for the entire 4,000 MW capacity allocated in Telangana.

The case follows the GST Council’s September 2025 recommendation to reduce GST on specified renewable energy devices from 12% to 5%. The revised rate became effective from September 22, 2025. Considering the 70:30 goods-to-services ratio used for solar contracts, the effective composite tax incidence declined from 13.80% to 8.90%.

TGDISCOMs had argued that the tax reduction lowered solar project costs and reduced overall capital expenditure by around 7%. Based on this, they sought a uniform 15-paise-per-unit reduction in the applicable tariff.

The petition received 711 written objections from farm-developers, rural entrepreneurs and industry associations. The stakeholders argued that solar project costs had increased significantly since the tariff was fixed in January 2021. They cited inflation, higher land prices, increased borrowing costs and rising prices of materials including copper, steel and silver. According to the objectors, a 15-paise reduction could affect project returns and debt servicing.

TGERC ruled that general inflation and increases in commodity prices could not be used to reopen the normative tariff. However, statutory tax changes covered under the contractual Change in Law provisions must be considered.

The Commission calculated the total financial impact of the GST reduction at 12 paise per unit. Under Article 13.2.2 of the PPAs, the financial impact of a Change in Law event is to be shared equally between the generator and the distribution licensee. Accordingly, TGERC capped the tariff reduction applicable to DISCOMs at 6 paise per unit.

As a result, the Applicable Tariff for eligible projects will range from ₹3.07/kWh to ₹3.13/kWh, depending on the proportion of project goods invoiced on or after September 22, 2025. Projects that were commissioned or had completed invoicing before the effective date will continue to receive ₹3.13/kWh.

The tariff adjustment will apply only to normative annual generation based on a 19% Capacity Utilization Factor. Any additional generation within the permitted 10% limit will continue to be paid at the full ₹3.13/kWh tariff.

TGERC has also directed TGDISCOMs to issue simple filing forms within 30 days for collecting project invoice details. The Commission said the savings realized through the tariff adjustment should ultimately be passed on to retail electricity consumers.