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70% duty may cripple 3-gw solar projects worth Rs 12Kcr:Crisil

70% duty may cripple 3-gw solar projects worth Rs 12Kcr:Crisil


Mumbai: The recent government decision toslap a hefty 70 per cent provisional safeguard duty onimported solar panels and modules from China and Malaysia willput 3,000-mw of solar projects under implementation, worth Rs12,000 crore, at risk, warns a report.

In a report, rating agency Crisil today noted that in2017, 4,000-mw of solar projects were auctioned at lowtariffs, so any rise in equipment cost after the 70 per centsafeguard duty would crimp the cushion that developers have toservice debt.

“Assuming 1,000 mw of excess inventory to be intransit, about 3,000-mw (3-gw) of capacities worth Rs 12,000crore, would be yet to tie up their module requirements, whichwill be at risk due to the imposition of the safeguard duty,”the agency warned.

Subodh Rai, a senior director at Crisil, said, “the 70per cent safeguard duty proposed will inflate project costs by25 per cent and crank up viable tariff to Rs 3.75 per unitfrom around Rs 3 estimated earlier, making solar power lessattractive to discoms. This tariff would also be more than theaverage power purchase cost of 10 of 14 discoms in FY17”.

Modules account for 55 per cent of th cost of a solarproject, and as much as 80 per cent of them are imported fromChina and Malaysia.

“With a few alternatives available, the proposedsafeguard duty would drive a sharp rise in the landed price ofmodules,” the agency noted.

Crisil said projects, wherein equipment are imported,have a ‘change in law’ clause under which developers can seekrelief but this is yet to be tested and will likely face legaland regulatory hurdles.

“Government has been nurturing the renewable energysector by taking conducive steps. Therefore, a timely finalorder resolving the duty uncertainty is necessary to balancethe targets of renewable energy and domestic manufacturingindustry, while preserving the feasibility of projects underdevelopment,” he said.

The finance ministry, through its standing board ofsafeguards, will take a final decision on the duty either onthe provisional or the final recommendations of theDirectorate General of Safeguards.

“Prolonged uncertainty on the quantum and timing of implementation of the safeguard duty will reduce developer interest in future bids and also impact investor confidence in terms of certainty of returns,” Manish Gupta, a director at the agency said.

Source: PTI
Anand Gupta Editor - EQ Int'l Media Network


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