Solar power developers have expressed concerns that safeguard duty on solar equipment may jeopardize India’s target of installing 100 GW capacity by 2022 as it would directly affect 25 GW volume under various stages of implementation and hit thousands of jobs in the segment.
According to a recent report by PTI, the Directorate General of Trade Remedies (DGTR), a recently created umbrella authority for trade matters, is scheduled to hold a public hearing in the national capital on Tuesday about imposition of 70 per cent safeguard duty on imported solar equipment.
This has led to some confusion among the industry players since the standing committee on safeguards under the finance ministry had last month decided that no such duty was required to be imposed.
The industry is worried as the process of pass through (of the cost of duty on tariff) is very uncertain, long and complex and does not provide any assurances of protecting these projects from becoming NPAs (bad loans), if the duty is imposed.
Industry experts are of the view that availability of solar power at competitive rates (below Rs 3/unit) will not sustain long as the project cost expected to be increased by almost 40 per cent with existing recommendations of DG safeguard for imposing the duty on the import of solar modules.
Giving an instance about uncertainty of pass-through process, the industry sources said to PTI that not a single party is granted relief on solar tariffs because of the Goods and Services Tax (GST) implications despite the provisions clearly laid out in contracts. Off-takers are opposing the impact on cost and legal process to continue for uncertain period.
Similarly, they said that no off-taker is going to bear this impact of duty under the pass-through mechanism and projects are likely to be failed if not protected through complete exemptions from safeguard duty if bids are submitted before the decision on safeguard.
According to industry estimates with current average tariffs of Rs 2.75 per unit, these rates are likely to be hit by 35 to 40 per cent (increase to Rs 3.85/Kwh) if the duty is imposed. The high tariff of above Rs 3 per unit would not attract any discoms to come forward and sign power purchase agreements.
The industry body Solar Power Developers Association (SPDA) has also filed their concerns with all authorities, including the Ministry of New and Renewable Energy, DGTR, the Ministry of Commerce and even the Prime Minister’s Office, pleading to take a rational decision in the interest of National Solar Mission and India’s commitments in COP 21 for achieving 40 per cent renewable in energy mix by 2030.
