The average global price of modules is also expected to come off from the current $0.30 per wattpeak to $0.27-0.28 per wattpeak by the end of this fiscal due to weakening demand in China
New Delhi: The 5 per cent safeguard duty on solar cells recommended by the commerce ministry is likely to raise tariffs in bidding for solar projects based on imported modules in range between Rs 2.9 and Rs 3.2 per unit as against the low of Rs 2.44 per unit discovered in recent bidding.
“To maintain current returns, the minimum bid tariffs for solar projects based on imported modules would need to rise to Rs 2.9–Rs 3.2 per unit for a duty rate of 25 per cent in the first year of imposition, compared with the Rs 2.44–Rs 2.80 per unit bid tariffs seen over the past few quarters,” research and ratings agency CRISIL said in a statement. “Duty rates at 20 per cent and 15 per cent applicable in the second year would need slightly lower tariffs of Rs 2.8–Rs 3.1 per unit for the same levels of equity IRR,” the agency added.
The Director General of Trade Remedies (DGTR) has recommended imposition of a 25 per cent duty on solar cells, assembled into modules or not, imported into India from China and Malaysia in the first year, followed by a gradual reduction to 20 per cent in the first six months of second year and further to 15 per cent in the latter half of second year.
Currently, 85-90 per cent of the solar modules used in India are imported from China and Malaysia. The duty recommended by DGTR is both a boon and a bane for the solar value chain because it provides an opportunity to domestic module industry to flourish but it could also raise capital costs for solar projects based on imported modules by around 15-20 per cent at current rates.
“Domestic manufacturers are expected to take advantage of the situation and price their products below that of imported modules, subject to demand-supply dynamics. Consequently, a rise in capital costs and bid tariffs would be inevitable as long as the safeguard duty is in place,” CRISIL said.
Domestic modules, which are typically 8-10 per cent costlier than imported ones, would become more competitive after the safeguard duty. However, the industry currently lacks the scale and the capacity to service the more than 10 Gigawatt (GW) average annual demand from the end-user segment.
“The average solar tariff was expected to remain aggressive, having touched Rs 2.44 per unit mark twice,” said Rahul Prithiani, Director, CRISIL Research. “But an increase in capital costs means solar becomes less competitive as compared to wind power, which averaged Rs 2.80 per unit in fiscal 2018 and has also seen tariffs as low as Rs 2.43 per unit. However, overall capacity additions may not be materially impacted as cost competitiveness of solar with other sources, barring wind, remains high, though there could be some near-term delays in project implementation,” he added.
The domestic industry is expected to take 2-3 years to scale up capacity. Till then, solar projects will have to be supported through equipment imports, possibly from exempt regions such as Vietnam or Thailand, where limited capacities exist, CRISIL said.
Also, the average global price of modules is expected to come off from the current $0.30 per wattpeak to $0.27-0.28 per wattpeak by the end of this fiscal due to weakening demand in China. Consequently, supply would be directed to other large markets such as India, which would lower prices.
Source: energy.economictimes.indiatimes
