- NSEFI fears more than 10 GW AC solar power capacity in India to be adversely impacted if it is not grandfathered from BCD
- It claims this would increase overall project costs and any increased tariff in the process may not be acceptable to the local discoms
- Project developers may end up raising finances for higher interest rates which would make the project unviable economically
The National Solar Energy Federation of India (NSEFI) fears over 10 GW AC solar power capacity in India to plunge into ‘uncertainty and might not get commissioned’ if it is not grandfathered from the imposition of Basic Customs Duty (BCD) on imported solar cells and modules. BCD is scheduled to come into effect from April 1, 2022 (see India Imposes Basic Customs Duty On Cells & Modules).
Notably, India has categorically refused any grandfathering of already bid out projects.
In a letter written to the Minister of Power and New and Renewable Energy, RK Singh, the association says these projects were awarded to developers before the ministry came out with its office memorandum about the duties on March 9, 2021. The recommendation came as a ‘serious jolt’ to the developers.
Imposition of the BCD will increase overall project costs and to deal with that, developers may have to raise short term working capital or additional equity at a much higher interest rate which would make the projects unviable economically. It explains, “This will hinder the liquidity and business expansion plans ultimately impacting the new projects and slow down the growth of the sector in comparison to the anticipated growth.”
Even for discoms, high tariffs due to the BCD may not work out for discoms that are feared to terminate existing power purchase agreements (PPA) or not accept the higher tariff. It would negatively impact the overall power purchase cost.
“Additionally, the incremental cost under change in law compensation will burden the end consumer with at least INR 0.30 per kWh and go up to INR 0.50 per kWh with the use of imported cells and modules for these specific projects,” said NSEFI Chairman Pranav R Mehta.
As India stands firm on its stance to bring in BCD as scheduled, Scatec and ACME Solar recently announced the decision to put on hold a 900 MW solar power plant through which the Norwegian company was stepping into the Indian solar market (see 900 MW India Solar Project Put On Hold).
Recently, the US government decided to play the balancing game by extending Trump-era imposed safeguard tariffs on imported CSPV solar cells and modules under Section 201 for 4 years to appease local manufacturers, but exempted bifacial solar modules so as to not stop the country’s solar growth in its tracks. It also increased the tariff-rate quota for solar cells to 5 GW annually (see US Extends Section 201 Tariffs).
Since India doesn’t still have solar PV manufacturing capacity of its own at economies of scale to help it meet the 280 GW solar capacity target by 2030, it remains to be seen if and what balancing act the government can introduce.