Hugh Raven, managing director of the Ardtornish hydro plant in Morven, was forced to lay off a fifth of his workforce due to high business rates on hydro schemes despite pleas for help to the Scottish Government.
Instead of financial help, Mr Raven said he was told there was no room for manoeuvre due to concerns around state aid rules.
However, after The Scotsman revealed ministers were allegedly provided with advice the Lochaber guarantee, worth £586 million, may have been in breach of state aid rules, Mr Raven said it was an example of “staggering and bewildering inconsistency”.
The Scottish Government continues to maintain the deal with GFG Alliance and its owner, Mr Gupta, is in line with state aid rules and has said Scotland is home to the most generous rates relief for renewables generators.
Mr Raven said he had made a plea to finance secretary Kate Forbes to help Ardtornish tackle high business rates, which he said were the result of hydro-plants being valued excessively high by the Scottish Assessors.
He took aim at the decision to support the Lochaber smelter and said Ms Forbes had claimed she was unable to help due his company due to state aid concerns.
Mr Raven said the revelation that ministers were warned the Lochaber deal may have been against state aid rules “incensed” him following Ardtornish’s struggles.
"If you want an example of one rule for us and another for them, look no further,” he said. “Struggling small business trying to do its best by the community – no help. Multi-millionaire, non-resident financier wanting a sweetheart deal with Scottish ministers – be my guest, even if it breaches the rules.
"I’m absolutely flabbergasted to see that they risked over £500m of public money to help the owner of one of the largest private estates in Europe, but denied a small rural hydro scheme assistance because they claim it didn’t fit their interpretation of the rules.
“There’s a staggering and bewildering inconsistency in the Scottish Government’s business policies and a shocking lack of support for home-grown environmentally-friendly rural jobs like those at Ardtornish.”
Mr Raven credited Ms Forbes for ensuring the rates relief of 60 per cent for the hydro sector would be in place until 2032 rather than being renewed annually, a decision made in last year’s Budget.
However, he claimed several businesses, including other renewable energy projects in Scotland, were still being hit by the fact they were not eligible for full rates relief.
This, he said, was stopping development of hydro-power in its tracks.
"Many businesses, including us in Ardtornish, that could invest in upgrading our hydro-schemes to produce more hydro-power, we are just not going to go near that so long as there’s a risk that we’re then going to get hit with penal rates,” he said.
"We had before us a couple of proposals for what would ostensibly be advantageous investments in enhancing the hydro schemes in our business, and we ain’t going to do them because the assessor may come along and whack a higher rating valuation on us.
"We won’t be eligible for rates relief and we could be heavily out of pocket. It’s having a chilling effect on the development of more hydro in Scotland.
"It is a fact that this problem is arresting further investment in hydro in Scotland and that’s the public policy reason they need to solve it.”
A Scottish Government spokesperson said they had met with Mr Raven and would continue to engage with him about his concerns.
The spokesperson said: “We value the contribution that the hydro sector makes to the Scottish economy and to our low carbon ambitions, which is why the Scottish Government has delivered the most generous non-domestic rates relief in the UK for renewables generators, including hydro schemes.
"The Scottish Government is still awaiting clarity on the subsidy framework that the UK Government is currently seeking to establish through the UK Subsidy Control Act.
“The Lochaber guarantee is compliant with EU state aid rules and was approved by the Scottish Parliament’s finance and constitution committee, which has cross party representation, following appropriate due diligence.”