The tariffs on future solar projects is set to increase with ministry of finance proposing to impose safeguard duty on solar panels imported from China and Malaysia.The finance ministry has currently suspended the implementation in light of stay order issued by the Orissa high court.
The imminent decision comes in wake of further decline in indigenously manufactured solar cells and panels. Currently more than 90 percent of solar cells and panels are imported from abroad. Majority are imported from China and Malaysia, mainly because imported equipment comes 25-30% cheaper than locally made ones.
Directorate General of Trade Restrictions (DGTR) recommended that safeguard duty should be imposed for two years. 25% for first year, 20% for first six months of the second year and 15% for remaining six months.
While the Finance Ministry still has to accept the Directorate General of Safeguards’ recommendation and there is no guarantee that it will, industry experts are already expressing concerns on the impact of such a levy on the solar power industry.
In a report released ratings agency CRISIL said that such a move will put 3,000 MW of solar power projects under implementation worth over Rs 12,000 crore at risk. The 70% safeguard duty proposed will inflate project costs by almost 25% to Rs 3.75 per unit from around Rs 3 per unit estimated earlier. This will make solar power less attractive to discoms.
This move can slow down India’s ambitious solar programme which aims to have 100,000 MW of solar capacity by 2022. Do the local manufacturers have sufficient capacity to meet the solar needs of indigenous market ?Will the consumers end up paying the extra costs with solar developers passing on the cost to discoms?Will this move lead to decrease in solar power growth in India?All these questions need to be answered before a decision is taken to impose this duty.