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No bidders in solar auctions due to duty fears

No bidders in solar auctions due to duty fears

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BENGALURU: In a reversal of the upbeat sentiment prevailing in solar energy last year, two recent solar auctions – one in Maharashtra and the other in Karnataka – have failed to attract enough bidders, leading to their repeated postponement.

Though India added a record 7,295 MW in 2017-18 until February end, and bid out another 10,500 MW through the year, Maharashtra’s latest 1,000 MW solar auction received bids of only 530 MW and thus had to be postponed for the fourth time. The auction, first announced by the Maharashtra State Electricity Distribution Co Ltd (MSEDCL) in December last year, had been put off three times earlier already. Its third deadline of February 23, received only two bids, while the fourth for March 9, again drew bids of just 530 MW.

Similarly, Karnataka’s 1,200 MW auction for projects at the Pavagada Solar Park drew bids of only 550 MW at the second effort. The Karnataka Renewable Energy Development Ltd (KREDL), which is holding the auction, initially set the last date for bid submission at February 21 but attracted only two bids of 100 MW each. The second deadline was set for March 2, and drew bids of just 550 MW.

With over 90% of solar equipment being imported, solar developers have become cautious ever since the Directorate of Safeguard Duty, reacting to a complaint from local solar manufacturers, proposed imposing 70% safeguard duty on imported solar panels in January this year on the grounds that such imports were crippling local industry. At the same time, the Directorate of Anti Dumping and Allied Duties (DGAD) has been separately considering another petition from local manufacturers seeking imposition of anti-dumping duty on imports. Developers prefer imports over local products because the former are 25-30% cheaper.

At first, developers stayed away from both the Maharashtra and Karnataka auctions because their bid documents did not include a crucial clause relating to ‘change of law’ – that the winning tariff would be renegotiated if any rules relating to the solar segment changed (such as the imposition of either safeguard duty or anti-dumping duty). “Maharashtra has still not agreed to absorb the duties, which is why developers are reluctant to bid,” said Vinay Rustagi, managing director of solar consultancy Bridge to India.

Karnataka, however, did incorporate the provision the second time it called for bids and yet has found few takers. “Just that single safety net clause is not enough,” said an industry insider. “Working out precisely how much the tariff should be revised upwards, if indeed safeguard duty or anti-dumping duty is imposed on solar modules, will be another challenge. The question isn’t of law alone. It is not easy to pass on any duty. Developers and discoms are unlikely to agree on the extent of the hit. That is the main reason developers have shunned this auction.”

Source: economictimes.indiatimes
Anand Gupta Editor - EQ Int'l Media Network

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