TOKYO (Reuters) - The Japanese government has decided to relax the conditions for cutting solar power subsidies for projects that have not started operations following opposition from power producers and other firms.

FILE PHOTO: Solar panels are seen at a solar power facility as snow covered Mount Fuji is background in Nakai town, Kanagawa prefecture, Japan, March 1, 2016. REUTERS/Issei Kato/File Photo

The Ministry of Economy, Trade and Industry (METI) in October had proposed that companies granted permits for solar projects between the fiscal years of 2012 and 2014 under the so-called Feed-In-Tariffs (FIT) system that guarantees minimum power prices submit applications by March 2019 to connect to the grid.

But the proposals had angered power producers and investors who say the cuts will undermine their profitability and violate earlier agreements.

Following the opposition, METI late on Wednesday said it would delay the deadline for submission of applications for at least 2 megawatt projects to the end of September. The deadline for start of operations was also delayed by six months to the end of September 2020.

Companies that miss the deadline will see their price guarantees under the tariffs of 32 to 40 yen ($0.28 to $0.36) per kilowatt hour (kWh) cut to 21 yen per kWh.

METI estimates show the subsidy cut could affect 23.5 gigawatts of solar capacity, or nearly 44 percent of the amount the government approved in the three-year period after the FIT scheme was created in 2012.

METI has said the cuts are necessary to reduce the public burden of FIT subsidies, which are added to consumers bills.

At the same time, METI is likely unhappy with the amount of unfilled permits. Data from the ministry shows 23 percent of the total capacity approved in the fiscal year 2012 is not operating, with 49 percent approved in 2013 and 59 percent approved in 2014 also not operating.

Japan introduced the FIT scheme to spur solar developments to fill the power gap after the country closed its nuclear power plants following the 2011 Fukushima disaster.

($1 = 112.8800 yen)