The National Solar Energy Federation of India (NSEFI) has written to the Ministry of Commerce and Industry, and the Ministry of New and Renewable Energy (MNRE) expressing concerns regarding the negative impact of the final safeguard duty recommendations by DGTR on the growth of solar installations in India.

Last week, the Directorate General of Trade Remedies (DGTR) recommended a 25 percent safeguard duty on solar cell and module exports from China and Malaysia for the first year, followed by a phased down approach for a second year. DGTR clarified that if imports from any other developing nation except China and Malaysia did not exceed 3 percent individually and 9 percent collectively, they would not attract a safeguard duty.

The NSEFI has made some suggestions that can be considered while implementing the safeguard duty.

Key Suggestions

• The competitive edge when it comes to solar modules and cells can be only achieved with economies of scale of manufacture and indigenization of products across the value chain. Despite surging demand, developing a value chain domestically at scale has been ignored when it comes to polysilicon, wafers, chemicals, ribbons, glass and others.
• The commissioning cycle of most solar projects is nine to 12 months and developers should be allowed time to complete importing cells and modules for their ongoing projects in the next 6-9 month period. Safeguard duty must be imposed only on new solar projects that are under bidding with effect from next financial year.
• The safeguard duty must not be levied on projects that have already been bid out as developers wouldn’t have accounted for a 25 percent duty which would increase projects costs by about 15%. Added costs will burden companies and impact their repayment of borrowings to lenders.
• The issuance of concessional customs duty certificates for solar projects that have been awarded and are under execution must be considered.
• The safeguard duty must be covered under the clause of “change in laws.”
• Developers and EPC contractors who have entered into agreements must be allowed to claim the upward variation in tariff and project costs.

Mercom previously reported that MNRE amended the guidelines for the tariff-based competitive bidding process for the procurement of power from grid-connected solar photovoltaic (PV) projects.

To remove any ambiguity, the MNRE stated, “Change in the rates of any taxes as mentioned in clause 5.7.2 of Guidelines for Tariff Based Competitive Bidding Process for Procurement of Power from Grid Connected Solar PV Power Projects, includes a change in rates of taxes, duties and cess.”

Further, in case a change in law results in any adverse financial loss or gain to the solar power generator, then under the new amendment, the MNRE entitles them to be compensated by the other party to ensure that the power generator is not adversely affected.

Recently, the Solar Power Developers Association (SPDA) also wrote to the commerce ministry seeking a complete exemption of the duty for projects currently under development. The SPDA addressed the pass-through option saying, “Even if the revised bidding norms are to be interpreted to allow the pass-through, the same is yet to be tested and established under a regulatory process. The process is both uncertain and time consuming and does not provide any assurance of relief to the developers.”