KEC International, a major EPC player in the power sector, is planning to shift the focus of its solar power division to projects tendered in West Asia as prospects for solar projects dry up in India on account of several issues related to applicability of GST rates and problems with availability of panels, a senior company official told FE. The company is looking at countries such as Saudi Arabia, the UAE, Jordan and Egypt, which have come out with tenders or are in the process of tendering. For this, it is in discussions with a lot of players that have bagged projects on PPA basis with governments in the region. “These are big projects and if we get even one project it would easily be Rs 1,000 crore,” KEC International MD & CEO Vimal Kejriwal told FE. The company is of the view that not much is happening in solar power due to the goods and services tax (GST) structure that imposes a 5% levy on solar power-generating systems but a higher 18% on EPC contracts. As EPC players are responsible for the complete work, they have been facing huge issues in finalising contracts with customers who are demanding a 5% rate be levied on the invoice amount. A clarification from the ministry on the matter, however, states that “solar power generating systems” do not include “civil engineering and erection materials”, on which a GST of 18% needs to be levied.
To address this, EPC players are suggesting split contracts but even this is facing opposition from many customers. Further, the import duties on panels are customs-exempt but there is a duty of 7.5% on diodes for panels. For panels coming with in-built diodes, the customs says that the panels fall under the electrical power-generating systems and will attract 7.5% duty plus 10% welfare cess. “We are providing corporate bonds at the ports to get our supplies,” said another company official. But this can only be a temporary arrangement and the issue is making doing business difficult. Finally there is volatility on the availability of the panels themselves. “There is no one willing to commit on supply of panels. If China increases the feed-in tariff regime, the entire panels will be used in China, while the other countries are very costly. We would say there is no work for us as EPC players in India as of now,” said Kejriwal. “We are going to participate in projects awarded by Middle Eastern countries and we are in talks for a few EPC projects. We will also bid for projects as competitive bidders. In fact, Kuwait is going to invite a bid for a very big project soon,” Kejriwal added. KEC has installed 165 MW of solar power capacity in India as an EPC partner and is presently working on setting up a 130-MW project in Anantpur Solar Park in Andhra Pradesh. “The project will be commissioned in phases by June this year,” Kejriwal said. He also stated that the company doesn’t want to be an owner of assets but it would like to see the solar EPC business make a meaningful contribution to the top line from FY19. “As of now our revenue from the solar business is Rs 350 crore and we see it contributing `1,000-1,500 crore from the next financial year,” Kejriwal said.