Q. As Madras High Court has dismissed the petition filed against levy of safeguard duty on import of solar modules and cells, how you will deal with the challenges in present scenario?
Solar power capacity addition is sensitive to solar tariff. Recent study by KPMG also underscores this fact that at a tariff of Rs.3.0 per unit solar power, India would be able to set up only 30 GW of solar plant but at Rs.2.50 per unit it would be possible to achieve the target of 100 GW easily. At Rs 2/unit tariff, there would be a demand for nearly 200 GW of solar power by various utilities, Railways and other bulk consumers.
With the continuous falling global solar panel prices and increasing solar cell efficiency, tariffs are going down globally. The tariff obtained in tender invited in Mexico, Chile, Saudi Arabia etc during Oct.-Dec, 2017 witnessed tariff ranging from Rs.1.15 to 1.39 per kWh. In India also the tariff had dropped to Rs.2.44 in the tender opening just before the introduction of GST and since then there is gradual increase in tariff. There has been a 5% GST on the solar panel as against 0% earlier.
However the threat of Anti dumping duty (ADD), safeguard duty and sudden change in customs duty of 7% from 0% has created an environment of uncertainty resulting in higher tariff quoted by the developers. Two similar tenders issued by Gujarat Urja Vikas Nigam Ltd (GUVNL) witnessed significant difference in tariff. Tariff obtained in Sep.2017 tender was 12% lower than the tender invited in Mar.2018 on account of uncertainty of increased taxes & duties like Safeguard Duties and/or anti-dumping duties.
Do we want low cost clean-power?
We have already achieved a tariff of Rs. 2.50/kWh with module price of $0.30 per watt peak. A safeguard duty of 30% will increase this tariff to approx. Rs. 3.20-3.25 per kWh. We have recently seen the 500 MW solar tender getting cancelled by the GUVNL because of tariff discovered was in the range of Rs. 3.00/kWh. Utilities are not willing to buy the solar power even at a tariff of Rs. 3/kWh as cancellation of Gujarat tender reveals. At 30% safeguard duty tariff will go up to Rs. 3.20-3.25/kWh which is likely to create negative demand for solar power. Against this backdrop, levy of the proposed safeguard duty should be seen?
People need access to low cost power. Solar power cost rapidly heading southwards which means further drop in solar power tariff. Therefore, logically all efforts are required to be made to ensure tariff reduction for the benefit of people and the country, as low power cost makes our industries competitive and thus create more jobs. Any measure that result in increase in tariff, needless to say, will be counterproductive. Thus, imposition of safeguard duty and anti-dumping duty is entirely avoidable.
India has total solar cell manufacturing capacity of 1753 MW as on December, 2016 and module manufacturing capacity of 6913MW. Evidently nearly 4000MW of module manufacturing capacity is entirely dependent on imported solar cells. Imposition of anti-dumping/safeguards duties on solar cells will make this module manufacturing capacity uncompetitive and will throw thousands of persons out of employment. Is it advisable to save a small solar cell manufacturing industry at the cost of huge market size of solar power development? Solar power has witnessed 60% growth in the last 3 years largely due to rapid drop in tariff.
Should government give incentive to solar manufacturer?
Government can consider to reserve most of the off-grid solar power market like solar lantern using LED bulbs, water pumping etc to domestic solar cell manufacturers who do not meet annual efficiency standard so that grid interactive solar power plant use only efficient cells & module that meet the annually fixed efficient standard. Different countries including China through programmes like “Top Runner” keep encouraging efficiency improvement of solar cell & module. Such approach will give sustained market to the domestic manufacturers and also help in India in setting up solar plants of higher efficiency to reduce land requirement and help to make tariff go downwards.
Q. In order to clear the clouds of discontent and uncertainty on safeguard duty, what clarity you want from the government on change in law clause or compensation mechanism or pass-through option?
The safeguard duty will definitely have an adverse impact on the solar industry. Utilities are the biggest beneficiary of the falling prices of solar power. Increased solar tariff will result in halt in solar power development on account of resultant tariff increase.
However, in the event of levy of safeguard duty, it must be pass-through. Further, the projects which are under implementation should be excluded from levying of safeguard duty.
Q. Now, as DGAD has also started its investigation on petition filed by one of the Indian manufacturer for imposition of anti-dumping duty on EVA sheets import. Will this add more injury to the domestic solar industry?
Though EVA sheets contribute approx. 3-4% to the cost of the solar panel, any cost increase will have a negative impact on the tariff.
Q. What could be the possible reasons behind delay in the decision on safeguard duty?
We welcome this delay. The possible reasons behind the delay could be as under:
Perhaps the government understands that imposing safeguard duty will have a negative impact on the solar power generation in country. The government understands that safeguards duty will lead to high tariff and discoms, already reeling under heavy debt, will find it difficult to buy the costly power. This will severely impact the fledgling but rapidly growing solar power development industry and thus the goal/target of achieving 100 GW may remain a dream.