The imposition of a 25% safeguard duty on import of solar cells and modules from China and Malaysia has the industry in a tizzy, with developers holding that the average tariff hike of 40 paise/kWh the move would necessitate jeopardises the future of projects bagged aggressively. The record tariff of Rs 2.44/kWh touched in May, 2017 was replicated as recently as July this year.
Ravi Verma, member, Governing Council, Solar Power Developers Association, says, “since the module cost is around 60% of the costs, any increase on account of the duty would impact project costs. The government should at least exempt projects for which PPAs have been signed, as past orders are being redeemed with extra duty at ports.” Banks had already begun asking for revised project costs and hinted at delaying fresh disbursal of loans, he adds.
ACME Solar, which bid at Rs 2.44/kWh in July, earned a stay on the issue from the Orissa High Court on July 25. However, the Centre went ahead and notified the safeguard duty for 2 years on July 30th. Pegged at 25% in the first year, the duty would be lowered to 20% for the next six months and 15% over the last six months.
The decision to impose a safeguard duty was taken after the Directorate General of Trade Remedies (DGTR) responded to a complaint from the Indian Solar Manufacturers Association in December. Its investigation concluded that the share of indigenous solar cells and panels in solar projects had fallen even below the 10% recorded in 2014-15, with developers preferring the cheaper Chinese and Malaysian equipment.
Shashi Shekhar, vice-chairman of ACME Solar, tells FE, “As per our calculations, even in Rajasthan with the highest solar irradiation, the tariffs would go up by at least 57 paise. The tariff at Bhadla in Rajasthan would rise to Rs 3.01/kWh. If the discoms refuse to purchase the power, we would have to terminate the projects.” He adds, “in all our discussions with discoms, they have said they would contest any hike in tariffs.”
Gyanesh Chaudhary, MD and CEO of Vikram Solar, feels the safeguard duty could impact 20,000-25,000 MW of projects. The notification includes solar cells and modules made in SEZs and cleared to domestic tariff area (DTA). Significantly, 40% of module and 60% of cell manufacturing units are located in SEZs. “SEZs enjoy benefits primarily for promotion of exports, but also to cater to DTA. If the duty is applied without exemption, the domestic manufacturers in SEZs would be liable to pay on sale in India,” he adds.
Sharad Mahendra, executive vice-president, JSW Energy, says PV panel prices had already risen to 31 cents/wp from 25 cents/wp in June. “The projects conceived at 25 cents/wp would be hit even if developers manage to get panels at 28 or 29 cents”.
Striking a contrarian note, Sunil Rathi, director of Waree Energies, one of the largest panel manufacturers, welcomes the duty even as he highlights that imports can happen from countries other than China and Malaysia which have faced the heat. “If we fail to monitor this, India will become a dumping nation for solar equipment, only from a different source,” he says.
According to the Ministry of New and Renewable Energy, India lacks the technology to tap fully its module production capacity. Polysilicon, made from silicon, is the key raw material for a solar cell or module. But, India lacks a manufacturing base for polysilicon, ingots and wafers. The country has an installed capacity of 3,100 MW of solar cells and 8,800 MW of solar modules. However, this has not been fully exploited, with only 1,500 MW of cells and 3,000 MW of modules being manufactured at present.
Animesh Damani, founder of consultancy firm Artha Energy says raw materials like silicon make locally manufactured modules 10% dearer than imports. “The lack of technology limits the domestic industry from growing, creating a gap between the cost of domestic products and imported modules,” he says.