MNRE Urges Ministry of Finance to Exempt Ongoing Solar Projects from Safeguard Duty

One of the biggest questions since the announcement of a 25 percent safeguard duty on imported solar modules and cells from China and Malaysia is about the impact on solar projects that are still under implementation.

“MNRE has written to the Finance Ministry in the past that if and when the safeguard duty is announced, any project which has already gone under contract should not be affected by the duty. MNRE has also requested for the finance ministry to issue a notification regarding this, so that there should be clarity on the matter, but the ministry has not issued any such notification”, an MNRE official told Mercom.

The Ministry of Finance (Department of Revenue) recently announced the levy of a safeguard duty based on the final recommendations proposed by the Directorate General of Trade Remedies (DGTR). The duty took effect on July 30, 2018.

According to the government announcement, the 25 percent duty will be applicable from July 30, 2018 to July 29, 2019. It will be reduced to 20 percent for the next six months until January 30, 2020, and will be further reduced to 15 percent until July 29, 2020.

“The industry is frozen right now due to lack of clarity from the Ministry of Finance after imposing the 25% safeguard duty on solar cell and module imports from China and Malaysia. Projects under development and procurement have come to a standstill as developers are unsure about the pass-through option, where millions will have to be paid upfront, with reimbursement timeline a big question,” said Raj Prabhu CEO of Mercom Capital Group.

It is also important to note here that the  Orissa High Court had put a stay on the implementation of the safeguard duty on solar modules and cells in response to ACME’s writ petition and the safeguard duty was imposed anyway, without clarifying how it was done.

Hero Future Energies, ACME Solar and Vikram Solar have filed new petitions in the Orissa High Court against the imposition of the safeguard duty by the ministry.

Speaking to Mercom about the filed petition, Sunil Jain, the CEO of Hero Future Energies, had earlier said, “The DG Safeguard has not taken cognizance of developers’ views and has exceeded his brief. We are not clear if this announcement is also a contempt of court, as the Orissa High Court had put a stay in place up to August 20, 2018. Now that the duty is being levied, our plea is to make the exercise of the pass-through option seamless and practical. The process should be easy so that the capital does not get stuck in a loop of government departments and departmental procedures. Projects that have been already bid out will be affected by this sudden imposition of safeguard duty. Most developers wouldn’t have factored in the added costs which may easily lead to NPAs. This is the plea we have made in the court against the safeguard duty imposition notification.”

Talking to Mercom, an official at one of India’s leading project developers, said, “The safeguard duty is applicable when the modules are reaching the ports. There may be some projects which are under construction, and their first consignment is on the way or a part of it is reaching after July 30, these will attract safeguard duty”.

He added, “In case of under construction projects, there is clause in the PPA, and a developer can approach the regulatory commission. Then, depending upon the project status, date of purchase order, custom clearance etc, the developer needs to prove that they been affected by the safeguard duty, commission can assess the impact and give it relief.”

Meanwhile, uncertainty in the industry continues until there is clear direction by the government.

Nitin is a staff reporter at Mercomindia.com and writes on renewable energy and related sectors. Prior to Mercom, Nitin has worked for CNN IBN, India News, Agricultural Spectrum and Bureaucracy Today. He received his bachelor’s degree in Journalism & Communication from Manipal Institute of Communication at Manipal University and Master’s degree in International Relations from Jindal School of International Affairs. More articles from Nitin Kabeer