Industry reacts to 25% duty; developers to cough up extra $ 72 million

From cheer to gloom, the Indian solar industry has had mixed reactions to the Supreme Court’s interim order lifting the stay on imposition of 25% safeguard duty on imported solar cells and modules.

September 11, 2018 Preeti Verma Lal

Adani -Mundra Solar PV Ltd (MSPVL) factory, located in Mundra, Gujarat, India.

Image: Adani

For import-dependent solar power developers, the Supreme Court order effective retroactively from July 30, 2018, will mean coughing up an extra INR 500 crore (US$72 million) for around 1,000 MW of solar modules imported between July 30 and now. That financial burden will slow down the aggregate 16,000 MW projects in the pipeline.

The order, however, is being cheered by domestic manufacturers, which believe that this step could salvage the industry, currently stressed with facing uneven competition from imports from China and Malaysia, which are 8-10% cheaper.

Not all domestic manufacturers stand to gain from the order, though. It will hurt local manufacturers based in special economic zones (SEZs), which currently accommodate 40% of the 10 GW of solar module manufacturing units, and 60% of the 3 GW cell production base.

“The aggressive bid tariffs from July 30 up to now, are a clear indication that the industry has already factored in the 25% safeguard duty. The new projects will not be gravely impacted; the big worry lies with the aggregate 16 GW solar projects in the pipeline,” Mr Pranav Mehta, Founder Chairman, National Solar Energy Federation of India (NSEFI) and Chairman-elect Global Solar Council (GSC), told pv magazine via telephone from Cairo (Egypt).

Taking up cudgels on behalf of the solar developers with projects in the pipeline, the NSEFI has already written to the Ministry of New & Renewable Energy (MNRE) for an exemption of the safeguard duty for such projects. “To keep the pipeline projects financially viable, MNRE will have to waive duties for these projects. If not, NSEFI is ready to go to court for exemption,” Mehta added.

Welcoming the order, Mr Sunil Rathi, Director, Waaree Energies, said, “The implementation of safeguard duty will provide a level playing field to the domestic manufacturers. During the initial phase, we anticipate a diversion of approximately 30-40% of demand for solar cells and modules towards the Indian manufacturers. With time, it will reach 70% of total demand and result in a corresponding increase in the manufacturing activity.”

Mr Nilesh Patel, solar consultant (Ahmedabad-based Movya Consulting) believes that solar industry players will be reluctant to bid until the final verdict of Odisha High Court scheduled for next month. “The 25% duty will result in an immediate hike in tariff from the average Rs 2.60 ($0.36) right now to about Rs 3.00 ($0.41) per unit. There is an imminent possibility of tariff touching the Rs 3.50 ($0.48) mark,” Patel said.

Solar consultant Mr Urvish Dave predicts a 5-7% tariff hike, but he is certain that despite the 25% duty, tariff will not soar beyond Rs 3 ($0.41) per unit. “Overall, it will not boost India’s entire domestic manufacturing sector. However, it will provide impetus to the top 8 -10 manufacturers having 500 MW or above annual production capacity,” Dave told pv magazine.

Calling the imposition of duty a retrograde step, Gagan Vermani, Founder & CEO, MySun, says that one single move has undone all efforts and achievements of the solar industry in the past few years.

“There is a big question mark whether the move will actually help the domestic manufacturing sector, as it is highly unlikely that manufacturers will draw up investment plans on the basis of just a two-year policy,” Vermani added.

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