Though India was a major inspiration behind the formation of the Gurugram-headquartered International Solar Alliance, the government’s earlier thrust on renewable energy seems to have abated, stakeholders say. One indicator was the government’s emphasis on coal-fired power plants in its latest Economic Survey brought about by the Ministry of Finance.
“The government had levied GST (Goods and Services Tax) on the solar sector,” SunSource Energy Chief Executive Adarsh Das told IANS here, indicating that the honeymoon enjoyed by the sun entrepreneurs may be ending.
Having first announced that solar would be in the 18 per cent tax slab, the GST Council later lowered the rate and clarified that all solar equipment and parts would attract five per cent GST. Solar was previously in the exempt category.
Besides, unlike the equipment makers, solar power developers like SunSource cannot avail the benefit of input credit for the tax paid under GST, Das pointed out.
Gaurav Mathur, the India sales head of Chinese module manufacturing giant Trinasolar, spoke of the lack of clarity surrounding smaller components such as cables, meters and the steel structures that go into a solar project.
“Many of these components individually attract a higher duty. Besides, anti-dumping duty is coming in to check cheaper Chinese products, which is going to push up costs of solar equipment,” Mathur told IANS, adding that such duties had recently been imposed on solar glass.
Norwegian solar panel multinational REC’s India head Rohit Kumar said anti-dumping measures recommended three years earlier had been rejected by the Finance Ministry on the ground that the local industry lacked the capacity to meet the government’s target of achieving 100 gigawatt (GW) solar capacity by 2022.
“Local manufacturing does not have the cost advantage that comes from scale and integrated production…they are only able to supply at 10 per cent higher costs,” Kumar told IANS.
Few companies in India are currently manufacturing solar cells, according to Trinasolar, which makes the largest cumulative shipments worldwide, and has supplied equipment for 3 GW capacity in India.
“The scenario for producing in India is still very challenging…components have to be imported from China,” Mathur said.
In addition to anti-dumping measures, domestic industry has protection under India’s national solar programme launched in 2010, which mandates that a producer compulsorily source a certain percentage of solar cells and modules from local manufacturers to be able to benefit from a government guarantee to purchase the energy produced.
However, Das noted that the Centre has no way of compelling states to comply with their renewable purchase obligations (RPOs).
A recent report by global accounting firm KPMG says that in the absence of strong local manufacturing, India would need to import $42 billion of solar equipment by 2030, corresponding to 100 gigawatt (GW) of installed capacity.
The solar stakeholders said that with the sharp fall in solar and wind tariffs, as well as in equipment costs, government incentives had dried up.
Solar tariffs arrived at through bidding have been declining continuously in India over the last few years, with tariffs falling to as low as Rs 2.44 per unit. Wind energy rates too have fallen to below Rs 3.50 per unit or kilowatt hour (kWh).
“The prices of solar and wind energy have hit a record low and the industry is now able to stand on its own feet,” Piyush Goyal had said at a media briefing recently when he was the New and Renewable Energy Minister. He is now the Railway Minister.
Government subsidy is no longer available for large ground-mounted solar projects or rooftop commercial and industrial units, according to these companies.
“The government’s logic is that large plants don’t need rebates any more because they have now become grid competitive,” Das said. Subsidies are now available only for units in residential projects and for non-profit organisations.
India’s total renewable generation capacity has crossed 57 GW, according to Mercom Capital Group, which analysed figures given by the Ministry of Renewable Energy. Of this, wind capacity amounted to 32.3 GW while solar comprised 12.5 GW. There was an increase of 24.5 per cent in the last fiscal among renewables, with solar energy capacity going up by 81 per cent.
In the midst of this came the Finance Ministry’s Economic Survey saying coal-fired thermal power should be encouraged, especially if one factors in the “social cost” of generating electricity from renewables for a country with a large population of poor.
Estimating the true cost of renewable energy at Rs 11 a kWhr, as against the much lower tariffs discovered through auctions, the Survey recommends going slow on renewables. Chief Economic Advisor Arvind Subramanian elaborated later that overemphasis on renewables would result in reducing the viability of coal-fired plants, adding to the massive non-performing assets, or bad loans, of state-run banks.
Rebutting the CEA’s contentions, stakeholders draw attention to surveys showing how hundreds of thousands of deaths in India are caused by pulmonary diseases, a large percentage of which is allegedly due to burning of coal.
“Climate change is a clear and present danger,” Das said, adding that millions worldwide were already suffering from the impact of global warming, the major cause of which, he claimed, was emissions from coal-firing plants.
According to the solar players, though India rightly holds the developed world chiefly responsible for climate change, the country had adopted renewable energy as an article of faith for sustainable development at a time when the US had pulled out of the global accord on the ground that its commitments are hitting jobs and the domestic economy.