Madhya Pradesh Clarifies the Impact of Solar Safeguard Duty on 30 MW Rooftop Tender

Four years ago, under the leadership of Prime Minister Modi, India set a target to install 175 GW of renewable capacity by the year 2022. Of the targeted capacity, 100 GW was earmarked for solar with 60 GW set for utility scale and 40 GW for rooftop solar. But so far, only 2 GW of rooftop solar has been installed as of Q1 2018.

Despite being a natural fit for India, rooftop solar is not seeing the kind of installations that the utility scale segment has. Most rooftop installations are coming primarily from government and commercial and industrial sectors. Residential rooftop market is almost negligible. Other than a lack of policy support, one of the primary reasons for the sluggish growth is the lack of viable financing options for residential customers.

High upfront costs of a rooftop solar system is the biggest deterrent in a country whose per-capita income hovers at around ~$1,700 annually.

Mercom has also reported that delays in subsidy disbursement are further hampering the growth of residential rooftop solar in India. Many rooftop solar installers are not keen to take up residential projects as securing project finance has become increasingly difficult due to delayed or non-payment of subsidies.



A small rooftop installer told Mercom, “Now, all the subsidies are disbursed through the Solar Energy Corporation of India (SECI) and state nodal agencies. These agencies float tenders and ask for earnest money deposit (EMD). It is very difficult for a small installer to furnish EMD. This has led to a virtual halt in the entire program. Last year, the government issued a tender for the installation of 100 MW of grid-connected rooftop solar by March 31, 2018, but not more than 15-20 MW has been installed to date.”

He added, “Though solar output attracts 5 percent of GST, input costs have different GST rates, and comes around a total of 17-18 percent. For small installers, say in the range of 5-10 kW, banks are not willing to extend financing. Banks also don’t hyphenate rooftop solar in the home loans, thus it attracts high commercial interest rates. Residential customers don’t want to give up their house or land as collaterals to banks for small rooftop-solar installations.”

Adding his thoughts about why the rooftop sector is struggling, Manpreet Singh, director at JS Solar Tech, said that the basic qualms among installers is that of financing. It is difficult for residential consumers to invest in rooftop installations. Our suggestion is that the government should mandate banks to give loans for solar rooftop, like an agricultural credit. Every bank should have allocated funds to be disbursed for solar rooftop in each financial year and a proper audit should be done. It should be EMI based, and EMI should be fixed like the monthly electricity bill so that it doesn’t seem or become an extra burden for consumers”.

Banks can demand quality guidelines in terms of materials or equipment used in installations, such as module ratings and the use of galvanised structures, and cable quality. This will also act as a guarantee for banks that installations will survive for the payment period.

Ashish Agnihotri of Oriano Solar believes that, “To accelerate the growth in rooftop solar, DISCOMs need to be brought on board. A three part agreement between DISCOMs, installer or EPC, and the consumer should be made. DISCOMs should ensure that the consumers pay on time and take ownership of the system in the case of default.”

“We don’t have a system in place in the case of defaults. Unlike in the advanced economies, where a solar loan default will adversely affect credit score, here in India, it is not counted in civil defaults. Banks also need to be on board,” he added.“Without the ability to finance, it is very difficult to crack the residential market. Very few can buy and install a solar system outright in India, so the other option is the lease (OPEX) model where the installer finances the project and receives a monthly payment from the residential consumer. But for this model to gain traction, installers need to be able to partner with financial institutions and the government needs to put some policies in place to absorb some of the risk and prod banks to lend since a credit rating system is not well established in the country for individuals,” said Raj Prabhu, CEO of Mercom Capital Group. The market also needs to innovate when it comes to financial instruments that are customized for the Indian market conditions.

Mercom India Research recently released its report on top rooftop solar installers in India in 2017. The top 10 rooftop solar developers in India accounted for 27 percent of rooftop solar PV installations. Tata Power was the top installer in 2017 followed by  CleanMax and Fourth Partner Energy.