• TERI expectssolar power tariffs to go up by around INR 0.38 to INR 0.50 ($0.0056 to $0.0073) per kWh due to safeguard duty
  • While impacting the competitiveness of the solar power sector in India, it may also lead to higher costs for customers and higher average power purchase cost for buying utilities
  • A better option is for India’s government to competitively procure for its own use only solar electricity generation from domestically manufactured panels, it suggests
  • Balancing solar power deployment targets and needs of domestic manufacturing industry is important for the country

Indian sustainable development think tank, The Energy and Resources Institute (TERI) believes imposing a PV safeguard duty will increase solar power prices by around INR 0.38 to INR 0.50 ($0.0056 to $0.0073) per kWh. These higher tariffs will impact the competitiveness of the solar power sector, it fears. Ultimately, it may lead to higher average power purchase cost (APPC) for utilities and higher costs to consumers.

Recently, the Government of India imposed a 25% safeguard duty on solar cells imported from China and Malaysia (see 25% Safeguard Duty Imposed By India).

India’s solar manufacturing industry is underutilized as it is unable to compete with economies of scale of their foreign counterparts. Higher cost of capital borrowed from banks and other financial institutions is also hampering the growth of the local solar industry.

Rather than a 25% safeguard duty, TERI Director General Ajay Mathur suggests, “A better option for promoting domestic industry is for the government to competitively procure, for its own use, solar electricity generated from only domestically manufactured panels.”

TERI says that it can be detrimental for project developers if current projects in their pipeline for which tariffs were determined in a pre-safeguard duty environment are not exempted. The ‘change of law’ definition will allow developers to pass-through the impacts to buying utilities. But TERI warns, that the whole process of determining the impact on solar tariff is an independent regulatory exercise that can involve legal procedures.

The government needs to balance the solar deployment targets and needs of the solar manufacturing industry, only then can we achieve the solar targets along with energy security, it underlines.

TERI has forwarded its recommendations on the subject to the Ministry of Commerce. The document can be viewed on the website of TERI.