New Delhi: Solar power tariffs in the country could go up if the commerce ministry’s proposal to slap 25 per cent import duty on solar cells shipped from China and Malaysia for the next two years is accepted by the government.
It could also impact the government’s ambitious goal of installing 100 gigawatts of solar energy by 2022.
Recommending the 25 per cent duty for two years, the directorate general of trade remedies (DGTR), a unit of the commerce ministry, said the overseas supplies have caused or threatened “serious injury” to domestic manufacturers.
The tariff would be lowered to 20 per cent for the first half of the second year and to 15 per cent by the second half. The recommendations need the finance ministry’s approval before they take effect.
“The imposition of safeguard duty in this case would be in public interest because it will prevent the complete erosion of the manufacturing base of the solar industry in the country,” the DGTR said.
India, the largest importer of Chinese solar equipment, first proposed a 70 per cent safeguard duty in January to protect its local industry.
Solar project developers, who rely on overseas components, have countered that the move would jeopardise the nation’s plans to boost its use of renewable energy.
Industry sources said the proposed safeguard could raise solar generation costs from new plants by as much as 56-60 paise per unit. Some 5,000-6,000 MW capacity, now under construction, could become unviable if DGTR’s recommendations are implemented.
The proposed duty could imperil Prime Minister Narendra Modi’s ambitious goal of installing 100 gigawatts of solar energy by 2022, especially as developers have relied on low-cost equipment from China to push tariffs to among the lowest in the world. The cumulative solar installed capacity in the country totaled 22.8 GW at the end of first quarter of the current fiscal.
“There is no question, this will increase solar power costs, but the safeguard duty has been toned down from the initial 70 percent to 25 percent for the first year. However, it is now up to the Ministry of Finance to consider whether to accept the recommendation or not. Hopefully the decision is taken quickly to remove uncertainty in the market,” Raj Prabhu, CEO of Mercom Capital Group said.