Imported solar modules are 8-10% cheaper than those made in India, making them vital for cheap renewable power
The threat of safeguard and import duties on solar panels has had a dampening effect on bidders for new projects. This marks a reversal of the trend witnessed in the second half of FY17 when solar tariffs fell 47% annually to Rs 2.97/unit. Maharashtra has to postpone auctions for 1,000 MW (announced in December 2017) four times due to muted interest from developers. The state, which had capped the tariff at Rs 3/unit, received only two bids for a little more than half of the capacity offered. Similarly, Karnataka’s invitation for 1,200 MW at the Pavagada solar park received tenders for only 550 MW. The Gujarat government has also cancelled 500 MW solar auction held in March as it found the tariff range of Rs 2.98-3.06/unit discovered through reverse auctions to be “on the higher side”.
The lowest solar tariff ever in India is Rs 2.44 per unit, discovered in May 2017 at the reverse auctions for solar plants in Rajasthan’s Bhadla. According to Care Ratings, the domestic solar equipment manufacturers’ demand for import duties to safeguard their interests is slowing the pace of new capacity development. Imported solar modules are 8-10% cheaper than those made in India, making them vital for cheap renewable power – solar modules comprise about 60% of total project costs. More than 85% of module requirements are met through imports.
The directorate general of safeguards in January recommended a provisional safeguard duty of 70% on solar cells and panels, but time lines for implementation are not clear. The Indian Solar Manufacturers’ Association’s (ISMA) intention to file fresh anti-dumping petition is also adding to uncertainty. Offering some relief to the sector, the Ministry of New and Renewable Energy earlier this month amended the bidding norms for solar projects, clarifying that all duties can be passed through by raising tariffs under the “change in law” provision. Going by dwindling tendering and award of solar projects, Icra expects a 40% decline solar capacity addition in FY19 compared with FY18.
Developers and investors have become risk averse and they are showing reluctance to participate in auctions, leading to reduced competition,
said Karunesh Chaturvedi, corporate affairs head at Vikram Solar, a domestic module maker. “In such a scenario, it is difficult for developers to calculate capex and finance costs,” Sunil Rathi, director at Waaree Energies, noted. Auction-discovered solar tariffs went up as high as `3.47/unit in September 2017 for 1,500 MW project in Tamil Nadu.
China-based Jinko Solar, one of the top equipment suppliers of the country, believes that other factors such as issues in land aggregating have also led to some state nodal agencies not clearing solar park bids. However, Donald Leo, managing director, Asia South, agrees that lack of clarity about the proposed duties “is leading to slowdown in tender roll-out, and the sector may lose its traction if this is not check urgently.”
ISMA claims that there would be “aggressive investments in new manufacturing capacities, both by existing manufacturers and by Chinese manufacturers, if the duties are announced. “We estimate that Indian cell manufacturing capacity will increase to 7.5 GW within a year of the duty announcement,” Dhruv Sharma, governing council member of ISMA, said. The current domestic solar-cell manufacturing capacity is about 3.2 GW.