Help Desk -
9717405332, 9599714297, 9810335381
Email
Password

70pct safeguard duty on solar will put INR 12,000 crore projects at risk

Power News - Published on Fri, 19 Jan 2018

Image Source: steelguru.com
Economic Times reported that levying 70% provisional safeguard duty on imported solar panels and modules from China and Malaysia, as recommended by the Directorate General of Safeguards, will put solar power projects of around 3,000 Megawatt capacity worth over INR 12,000 crore at risk.

Research and ratings agency CRISIL said that India auctioned around 4,000 Mw of solar projects last year (2017) which are currently under implementation now. Orders for modules are typically placed with a lead time of one year. Around 3,000 Mw of capacities would be yet to tie up their module requirements, assuming 1,000 Mw of excess inventory to be in transit.

As these projects were auctioned at low tariffs, any rise in equipment cost after the safeguard duty would crimp the cushion that developers have to service debt. Mr Subodh Rai Senior Director, CRISIL Ratings said that "The proposed 70 per cent safeguard duty will also inflate project costs by 25% and crank up viable tariff to INR 3.75 per unit from around INR 3 estimated earlier, making solar power less attractive to discoms. That would also be more than the average power purchase cost of 10 out of 14 discoms last fiscal.”

CRISIL said that Modules account for around 55% of a solar project's cost and 80% of them are imported from China and Malaysia. With few alternatives available, the proposed safeguard duty would drive a sharp rise in the landed price of modules, adding such solar power projects typically have a 'Change in Law' clause under which developers can seek relief but this is yet to be tested and will likely face legal and regulatory hurdles.

The agency also said a timely final order resolving the duty uncertainty is necessary to balance the targets of renewable energy and domestic manufacturing industry, while preserving the feasibility of projects under development.

The Ministry of Finance, through its Standing Board of Safeguards, will take a final decision on the imposition of safeguard duty either on the provisional or the final recommendations of the Directorate General of Safeguards.

Mr Manish Gupta, Director at CRISIL Ratings said that "Prolonged uncertainty on the quantum and timing of implementation of the safeguard duty will reduce developer interest in future bids and also impact investor confidence in terms of certainty of returns.”

According to the ratings agency, retrospective application of safeguard duty on which the viability of the 3,000 Mw of solar power projects hinges would be a key monitorable going forward.

Source :

Posted By : Nanda Koijam on Fri, 19 Jan 2018
Related News from Power segment