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GST impact on renewable power: Concerns delay auctions in Gujarat

GST impact on renewable power: Concerns delay auctions in Gujarat


The state electricity board of Gujarat has extended the deadline to receive bids to develop solar and wind projects of 500 MW each. The decision was taken after prospective bidders wanted more time as “there is no clarity on GST rates”. The final date for bid submissions for both solar and wind projects has been extended to July 24 from July 10. Bidders also said Gujarat Urja Vikas Nigam (GUVNL) set the deadline at a relatively short span of 25 days after the pre-bid conference. Subsequently, the reverse auctions will now be held on August 1 for wind projects and August 2 for solar projects. Public sector units would be allocated 75 MW of solar and wind projects. The amount of performance bank guarantee has been reduced by 50% to Rs 25 lakh/MW for both wind and solar tenders.
According to research firm ICRA, Gujarat is one of the few states over the last two or three-years where actual payment cycle by the distribution utilities to renewable power producers is within the prescribed timelines. In a recent survey done by renewable energy research agency Bridge to India, Gujarat was also ranked the third among top ten Indian states as far as ease of doing business for solar projects was concerned.
Though all solar equipment and its parts would attract 5% GST, component used in solar plants would be levied a higher rate when used in non renewable energy projects. Bridge to India had noted earlier that “in the absence of any specific notification for solar projects, GST rate varies from 18% for capital goods such as inverters and module mounting structures to 28% for cables and batteries”.
In a separate report, Bridge to India had said the GST would have a marginally negative impact on the solar industry, with chances of capital cost for new projects rising by 4%. Icra had noted that if the equipment mix for wind projects remain the same after the GST (30% imported, 30% intra-state and 40% inter-state), tax rates would inch up to 5% from the earlier rates of 3-4%.
Though competitive auctions for solar projects have been more popular, there has only been one such bidding for wind power. The government’s first wind auction for 1,050 MW was held in February, where tariffs touched a historic low of Rs 3.46/unit. Wind projects were ususally set up through feed-in tariffs (FiT) – a cost-based compensation system. Wind energy tariffs through FiTs are in the range of Rs 4.16 to Rs 5.76 a unit. Feed-in tariff for wind power in Gujarat is set at Rs 4.19/unit till FY18.

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


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