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MNRE seeks exemption from safeguard duty for current solar power projects

MNRE has urged the Indian finance ministry to exempt solar power projects under implementation from the 25% safeguard duty imposed last month

MNRE secretary Anand Kumar told the Economic Times: “We have requested the finance ministry to exempt projects that have already been awarded or were at the implementation stage before July 30.”

Since the duty came into effect, solar power developers have voiced their concerns on raising additional capital in a recent meeting with MNRE officials, stating that they did not factor in safeguard duty while bidding for projects initially, according to officials.

With tender activity having picked up significantly in the second half of 2017, solar projects of around 13,000 MW capacity are estimated to be under construction, including all the recently concluded solar auctions – according to renewable energy consultancy firm Bridge to India.

The finance ministry has notified Directorate General of Trade Remedies’ recommendation to implement 25% safeguard duty on solar panels imported from China and Malaysia for one year. The quantum of duty would then reduce to 20% over the next six months, and then to 15% for the following six.

While the duty seeks to protect the domestic solar manufacturing industry from cheap imports – project developers have maintained that it would increase solar tariffs by a little bit. Right now, almost 90% of the solar equipment coming to India is from China.

Kumar also said: “Project developers are finding it difficult to raise additional costs for the modules. In case the pass through is resorted to, it will create logging off the capital.”

While the Indian government has already allowed for developers to pass on additional costs to distribution companies, resorting to the measure has been difficult, according to industry experts. An unnamed official said: “Developers will have to approach Central Electricity Regulatory Commission for availing pass through. The process usually takes an year and a half.”

Vinay Rustagi, managing director of Bridge to India stated that even if developers approach the regulator for having a tariff hike approved, the whole process of availing a pass through will involve a lot of back and forth between the regulator, distribution companies and the developers themselves.

“The discom,until the end,will keep resisting the extra tariff even if the regulator rules in favour of the developers,” said Rustagi. “In this casem exemption of the projects is the fairest solution. Typically in safeguard duty, no exemption like this is given. The question is whether the ministry of finance is sympathetic to this request.”

Rustagi also said that despite the prices of modules falling sharply in the last five months, developers cannot be deprived of the benefits resulting from them.

An executive at a leading independent power producer (IPP) said: “The falling module prices do not really add up as developers are already facing other risks, whether it is in terms of the cost of borrowing, or currency fluctuation.”

-GBO Correspondent

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