Safeguard duty has not been effective: Ranjit Gupta, CEO, Azure Power
We do not believe that the current safeguard duty scheme has been effective and we are wary that the proposed Basic Custom Duty will have much of an impact as well, said Gupta
Delhi based solar power producer, Azure Power plans to build about 1 GW of capacity every year over five-years with an investment of $3 – $3.5 billion, Ranjit Gupta, Chief Executive Officer (CEO), Azure Power told ETEnergyworld in an exclusive interview. Edited Excerpts:
The company has in its portfolio around 7.1 Gigawatt (Gw) of projects in India. What is the break-up in terms of current installed capacity and the expansion plans?
We have 1.8 Gigawatt operational projects, another 1.3 Gigawatt under construction, 2 Gw in development and additional 2 Gw in the pipeline. We will invest in new projects only if we find them value accretive and when the returns are above our cost of capital. With our existing portfolio, we plan to build about 1 Gw of capacity annually over a five-year period.
What has been the impact on your business operations as a result of the Coronavirus outbreak?
Our completed plants remain fully operational during the recent “lockdown” in the country. We have been receiving payments towards electricity supplied from all our customers in normal course and there has only been minor curtailment of our plants, as of now. At this time, we do not see a material impact on Azure plans for 2020-21. However, we are closely monitoring the situation in India as well as the health and safety of all our employees.
Can you give us some details about the current ongoing projects? Has there been an impact on execution of these ongoing project orders?
All of our operational projects remain fully running while the under-construction projects have been temporarily halted under the “lockdown” directive. We are reviewing the recent guidelines from the Ministry of Home Affairs which grant permission for construction of renewable projects after April 20, which is a positive step for the sector. However, resuming construction activity will face some challenges. For a project to be constructed successfully, many moving parts must work together efficiently. Mechanical and electrical equipment must be manufactured, labour has to be arranged, steel and cement has to be supplied and all of this material has to be transported many times across state boundaries. While the government of India recently relaxed transportation restrictions to facilitate movement of construction materials and labour, it takes time for these notices to be implemented at the ground level. Many districts are still declared as ‘Hot Spots’ and industries in these districts will not be able to operate which will cause continued disruptions in the supply of critical parts. Civil work is expected to be the most challenging to start.
The Coronavirus pandemic is likely to leave a trail of economic disruption across sectors. How is this crisis different from the 2008-09 economic crisis? What will be the economic impact of this crisis on the power and renewable energy sector?
It is really difficult to know how long the impact of COVID-19 will last and how quickly economies will recover. As solar is the lowest cost source of electricity we believe we are well positioned for the future. Construction and operation of solar plants can be easily done while adhering to social distancing norms as the projects are spread over a large expanse of land. We believe renewable energy will continue to be the cheapest, cleanest, and safest form of energy in the post COVID world.
What are the labour-intensive areas in your company’s business? Across the sector, company executives and industry experts have raised concerns about the shortage of non-technical labourers working in the industry as they all have gone back home due to the lockdown. How big a concern is this for you?
Deployment of labour will be a huge challenge given the restrictions on intra and interstate public transportation. There has been huge migration of labour in the last few weeks and with no or limited intra and interstate public transport available, they may find it difficult to return to the work sites which could cause further delays and we are looking for the government to respond by allowing our labour to safely to return to work.
Would a continued dip in demand lead you to rework your capacity addition targets or moving to new geographies? To what extent has the disruption in the supply chain impacted your company?
The Ministry of New and Renewable Energy has stated categorically that the renewable energy capacity addition targets for the country will not be disturbed. There is evidence of this, even now. Even during the lockdown, an auction for 2,000 MWs of new solar capacity took place on April 16. Since solar is the lowest cost and cleanest power for the grid, states will continue to purchase solar even in a scenario where there is reduced demand for electricity. Supply chain disruption for us has been very minor for our operating projects. As the government eases lockdown restrictions, transportation of supplies for our projects will become easier. As trucks get back on the road, we believe the supply chain situation will continue to improve.
Azure Power bagged the SECI’s manufacturing-linked solar tender recently after bidding for 500 MW solar cell manufacturing capacity and 2 GW generation capacity. What is the update on that front?
In December 2019, we won a 2 GW interstate transmission (ISTS) solar power project with SECI to supply power for 25 years at a tariff of Rs 2.92 per kWh along with setting up manufacturing capacity of 500 MW of solar cells and modules annually. Azure was selected in January to double the capacity offered by SECI as part of a greenshoe option in accordance with the renewable fuel standard. We have received the letter of award for the first 2 GW and are expecting to receive the LOA for the remaining 2 GW soon. Once the power purchase agreement (PPA) is signed, this 4 GW will be commissioned over 5 years and we will be partnering with solar manufacturer Waaree Energies on the manufacturing portion of the award.
Do we have the right policy or the regulatory environment in place that would lead to a significant ramp-up in domestic solar manufacturing over the next few years?
Ultimately, India’s solar manufacturing must be competitive to the rest of the world for it to grow significantly and once this happens, we would expect there will be significant expansion. We believe the best way for the government to help domestic manufacturing become competitive is through incentives that are given to the manufacturers directly. We do not believe that the current safeguard duty scheme has been effective and we are wary that the proposed Basic Custom Duty will have much of an impact as well. In case the government imposes custom duty we believe a longer tenured and reasonable imposition will help eliminate the inefficient process of seeking relief under Change in Law, as faced during the safe guard duty relief seeking process.
Do you think this covid 19 crisis would make meeting the rooftop solar target difficult? What about the plans of getting into new technologies like floating solar and storage?
There are unique challenges for rooftop solar to begin with and the COVID-19 pandemic is likely to stifle growth until a vaccine or cure is developed. We are very interested in the future of storage as this could provide some real positives for renewable energy. The future of renewable energy is to provide round the clock power to the grid which can happen only through storage. We will continue to evaluate this opportunity and would consider participating in a storage-based project if the returns meet our investment hurdle.
What are your capex plans for this fiscal year? Are you on track to achieve them?
We have 1,300 megawatts under construction and expect to spend about $600 – $800 mn in this fiscal year. The focus is to make sure that these are delivered on time and in budget and that it is done in a safe manner for our employees. With our pipeline, we plan to build about one gigawatt of capacity every year over a five-year time period which we estimate will involve an outlay of around $3 – $3.5 billion.
Source: energy.economictimes.indiatimes
