NEW DELHI - Madhya Pradesh, India's second largest state, has appealed to the country's top court to quash a Goldman Sachs-backed solar project, highlighting the challenges faced by solar companies looking to expand in Asia's third largest economy.
Madhya Pradesh's attempts to scrap the agreement with ReNew Power over the 51 megawatts (MW) project, citing land acquisition delays, were thrown out by a state court.
But the central Indian state's distribution company (discom) has now appealed to the country's highest court, potentially setting up a prolonged legal battle.
The move comes after Madhya Pradesh cancelled three solar power purchase deals with Canada-based Sky Power Global, also due to issues related to land acquisitions. Sky Power challenged the cancellations in the state high court, but lost the case.
India is targeting a 30-fold increase in solar power generation capacity to 100 gigawatts (GW) by 2022.
But the plan risks running into trouble as debt-laden states try to renegotiate deals with solar investors.
Six state governments have pushed developers to lower tariffs on projects worth $7.5 billion in the last two months, prompting India to bar state authorities from unilaterally cancelling or modifying solar power purchase agreements.
Solar tariffs fell to a record low of 2.44 Indian rupees per unit earlier this year, leading several state discoms to try to renegotiate contracts, saying the prices they were paying to purchase power were too high.
ReNew Power, which has invested 20 billion Indian rupees ($314 million) in Madhya Pradesh, alleges the state discom is not commissioning its plant, despite it being ready a week ago.
"The plant is ready since Aug. 30, while the specified date of commissioning was Sept. 7," said ReNew's chief operating officer Parag Sharma.
ReNew has written to the discom seeking compensation if the project agreement is terminated, Sharma told Reuters.