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CERC Guidelines

For Feed in Tariff 

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Excerpts from CERC Document (For calculating tariff)

Tariff Period: 25 years f r om the date of commer cial operation

Debt-Equity ratio: 70:30

Loan Tenur e: 10 years

Inter est Rate: SBI¶s PLR + 150 basis points (SBI¶s PLR was 11.75% in 2009)

Salvage value: 10%

Depr eciation: 7% per  annum for  f irst 10 years

Remaining value spr ead f r om 11-25 year onwar d

Retur n on Equity Pr e-tax 19%/annum for  the f irst 10 years

Pr e-tax 24%/annum f r om11th year onwar ds

Capacity Utilization Factor (CUF): 19%

CDM (Clean Development Mechanism) 100% to be r etained by pr oject developer  in the f irst year 

In the II year  the shar e of benef iciar y shall be 10% which is pr ogr essively incr eased by 10%/year 

till it r eaches 50% wher e after pr oceeds ar e shar ed equally. 

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CERC Guideline for Tariff Calculation

Tariff calculation shall be based on:

Retur n on equity

Inter est on loan capital

Depr eciation

Inter est on working capital

Operation and maintenance expenses

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Capital Cost Definition

Capital cost shall comprise:

Plant and machiner y

Civil work Er ection and commissioning

Financing and inter est

Power evacuation

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Working Capital Cost Definition

Working capital shall consist of:

Operation and maintenance r equir ement for  1 month

Receivable equivalent to 2 months of energy charges for  sale of electricity

calculated on the nor mative capacity utilization f actor 

Maintenance spar e @ 15% of operation and maintenance expenses

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Operation and Maintenance Expense Definition

Operation and maintenance shall comprise:

Repair  and maintenance

Establishment including employee expenses

Administrative and general expenses

Annual escalation rate: 5.72% over  the tariff period

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Payment Terms

Rebate Payment of bills thr ough L/C: 2%

Other than L/C within a month of pr esentation of bill: 1%

Late Payment Sur charge 1.25% per month if payment is delayed beyond a period of 60 days

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Subsidy or Incentive by the Central / State Government

The Commission shall take into consideration any incentive or  subsidy offer ed bythe Central or State Gover nment, including accelerated depr eciation benef it if 

availed by the generating company, for the r enewable energy power plants while

deter mining the tariff under these Regulations.

Pr ovided that the following principles shall be consider ed for  ascer taining income

tax benef it on account of accelerated depr eciation, if availed, for the pur pose of tariff deter mination:

i.  Assessment of benef it shall be based on nor mative capital cost, accelerated

depr eciation rate as per  r elevant pr ovisions under  Income Tax  Act and

cor porate income tax rate.

ii. Capitalisation of RE pr ojects during second half of the f iscal year.

Per unit benef it shall be derived on levelised basis at discount f actor equivalent toweighted average cost of capital.

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Taxes and Duties

Tariff deter mined under  these r egulations shall be exclusiveof taxes and duties as may be levied by the appr opriate

Gover nment:

Pr ovided that the taxes and duties levied by the

appr opriate Gover nment shall be allowed as pass thr ough

on actual incurr ed basis.

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Template for Financial Analysis

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