What solar manufacturers want from Budget 2019

Indian solar manufacturers are facing a double whammy with USA removing preferential trade status for India and safeguard duty imposed by India nearing fall to 20% from July 2019. Struggling to find domestic as well as export markets, they expect the government to focus on policy direction, not just expenditure.

June 27, 2019 Uma Gupta

In FY18 alone, around 9.8 GW of Chinese solar modules were imported, meeting 85% of India's demand.

Image: Sraisth

The impact of USA’s protectionist measures on India can’t be dismissed as USA is the largest export market for Indian solar cells. India exported solar cells (whether or not assembled in module/panel) worth Rs 72,488.43 lakh in 2018-19, of which USA accounted for Rs 34,788.18 lakh—which is more than half of India’s total solar cell exports in value terms.

“With Indian exports to USA now facing a higher tariff, it is imperative [for the government] to build and maintain trade relations with nations of stronger currency and greater market dominance,” says Sunil Rathi, director at solar module manufacturing company Waaree Energies.

While bifacial solar modules have been excluded from Section 201 tariffs imposed by the United States, which currently apply a 25% tariff to most solar modules imported to the United States, “the lack of clarity in the timeline only presents the domestic players with interim relief,” according to Rathi.

Similarly, at the home turf, the government needs to implement airtight laws to provide Indian solar manufacturers with a level-playing field to compete against cheaper imports.

“Introduction of stringent anti-dumping duties would make a mark where the current safeguard measures are unable to control countries like Thailand and Vietnam from encroaching on the Indian solar ecosystem. Reduced dependency on imports will strengthen the Rupee denomination, thus contributing to India’s gross domestic product,” added Rathi.

To expand domestic demand, rival Vikram Solar’s Amit Gupta, director-legal & corporate affairs, suggested that rooftop solar installations using indigenously manufactured solar modules be made mandatory for all government buildings, schools and hospitals.

“Setting up of a dedicated agency to provide insurance cover for solar power installations at affordable prices will further promote adoption of clean energy,” he said.

RPO compliance

Lauding power minister’s recent proposals to ease financing for renewable energy projects, Rathi said it is also important to ensure stringent renewable purchase obligation (RPO) compliance by the states.

Though the Ministry of New and Renewable Energy has been aggressively pushing solar RPO compliance, 24 of India’s 29 states and seven union territories have been unable to meet even 60% of their RPO targets. Only five states—Karnataka, Himachal Pradesh, Andhra Pradesh, Nagaland and Meghalaya – plus the union territory of the Andaman and Nicobar Islands, have met their targets.

Further, Rathi urged implementation of ‘first in first out’ payment mechanism by DISCOMs in order to ensure steady demand and ease in cash flow.

Funding and incentives

A recent Parliamentary standing committee report recently highlighted the diversion of National Clean Energy Fund to compensate states for their revenue loss following the rollout of Goods and Services Tax. Quoting the report, Gupta recommended that the fund be utilised exclusively for promoting domestic manufacturing of renewable energy projects in order to promote clean energy solutions.

“The finance ministry should announce the roadmap to bring down corporate tax to 25% in the coming years. Minimum alternate tax—a fixed percentage of company profits payable as tax—can be brought down for units operating in special economic zones in order to increase their competitiveness,” he added.

To encourage R&D, Gupta urged that 200% tax deduction on R&D expenditure in new and clean solar technology development (which could be a part of the offset/Make in India arrangement) be allowed. India already offers 200% tax deduction on R&D expenditure in emerging areas such as bio-technology, which has led to rapid growth of the Indian biotech and pharma companies.

Further, “the budget must allocate special funds for strengthening the grid infrastructure (to ensure smooth renewable energy integration and grid/transmission downtime reduction) and development of electric vehicle battery ecosystem. A cess on diesel should be imposed and the same should be used to expand electric vehicle infrastructure in the country. Under corporate social responsibility obligations for next 10 years, the amount spent by companies to put up captive solar power plants should be allowed as deduction,” said Gupta.

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