The ministry of new and renewable energy (MNRE) has urged the finance ministry to exempt solar power projects under implementation from 25% safeguard duty imposed on imported solar equipment last week.
“We have requested the finance ministry to exempt projects that have already been awarded or were at the implementation stage before July 30,” MNRE secretary Anand Kumar told ET. The duty came into effect on July 30.
Solar power developers had voiced their concerns about raising additional capital in a recent meeting with MNRE officials, saying they did not factor in safeguard duty while bidding for projects, officials said.
With tender activity having picked up significantly in the second half of 2017, solar projects of around 13,000 MW capacity are estimated to be under construction as on July 30, according to renewable energy consultancy firm Bridge to India, including all the recently concluded solar auctions.
The finance ministry has notified Directorate General of Trade Remedies’ recommendation to implement 25% safeguard duty on solar panels imported from China and Malaysia for one year. The quantum of duty would reduce to 20% in the next six months, and then to 15% for the following six.
While the duty seeks to protect the domestic solar manufacturing industry currently facing the onslaught of cheap imports, project developers have maintained that the duty would increase solar power tariffs by around 40 paise per unit. Almost 90% of solar equipment used in India is imported with 85% of it coming from China.
“Project developers are finding it difficult to raise additional costs for the modules,” MNRE’s Kumar said. “In case the pass through is resorted to, it will create logging of the capital.”
While the government has already allowed developers to pass on the additional costs to distribution companies, resorting to the measure is a cumbersome process, officials and industry experts say. “Developers will have to approach Central Electricity Regulatory Commission for availing pass through. The process usually takes around a year and a half,” said an official who requested not to be named.
Vinay Rustagi, managing director at Bridge to India, said even if developers approach the regulator for having a tariff hike approved, the whole process of availing a pass through will involve a lot of back and forth between the regulator, distribution companies and the developers.
“The discom, until the end, will keep resisting the extra tariff even if the regulator rules in favour of the developers,” Rustagi said. “In this case, exemption of projects is the fairest solution. Typically in safeguard duty, no exemption like this is given. The question is whether the ministry of finance is sympathetic to this request.”
Even as the prices of modules have fallen sharply in the past five months, developers cannot be deprived of the benefit resulting from it, Rustagi said.
An executive at a leading independent power producer (IPP) said, “The falling module prices do not really add up as developers are already facing other risks, whether it is in terms of the cost of borrowing, or currency fluctuation.”