More than 2 GW of planned solar tenders have been postponed across three Indian states recently as bidders have been deterred by the ongoing uncertainty around proposed duties on critical project components, which have made it difficult to forecast project costs and viable bids.

In recent weeks, unenthusiastic bidder response has prompted implementing agencies in the states of Bihar, Maharashtra, and Karnataka to extend the bid-submission deadlines for their respective solar project tenders.

The Maharashtra State Electricity Distribution Company Limited (MSEDCL) pushed back the bid-submission deadline for a tender it first issued in December 2017 to March 9, 2018 from January 20, 2018. The extension came after the tender generated a tepid response and some prospective developers asked the agency for more time.

MSEDCL is looking to develop 1,000 MW of grid-connected solar photovoltaic (PV) projects to fulfill its Renewable Purchase Obligation (RPO).

An MSEDCL official told Mercom, “Few bids were received for the tender and moreover, many project developers had mailed the MSEDCL seeking an extension of at least two weeks in the bid-submission deadline, so we obliged.”

The MSEDCL official did not think that the requested upper tariff ceiling of ₹3 (~$0.046)/kWh contributed to the low response, telling Mercom, “No, not at all. Though the project developers are wary about (the potential for a) safeguard duty and an anti-dumping duty. They were asking us about these issues as well. I can say that the developers have serious apprehensions about the safeguard duty and the anti-dumping duty and this might have resulted in many of them seeking an extension of the timeline.”

Asserting the same apprehensions, an executive at a domestic solar project developer told Mercom, “In Maharashtra, ₹3 (~$0.046)/kWh is the upper cap. If MSEDCL can give in writing that safeguard duty won’t affect the PPA entered now, we and many others like us will participate”.

The Karnataka Renewable Energy Development Limited (KREDL) has likewise extended the bid‑submission deadline for a tender of 1,200 MW of grid-connected solar PV projects planned for the Pavagada Solar Park in Karnataka’s Tumkur district.

KREDL extended the bid-submission deadline to March 5, 2018 from February 21, 2018, Mercom reported, after fewer bids than expected were garnered before the initial cut-off date.

Commenting on the development, a KREDL official said, “Very few bids were received for this tender, so we decided to extend the deadline.”

When asked what could be the reason behind the lackluster response, the KREDL official said, “Even we are baffled. We recently auctioned 760 MW of solar in Karnataka and that auction was a success.”

The Bihar Renewable Energy Development Agency (BREDA) has also opted to extend the deadline for bids to develop 40 MW of grid-connected solar PV rooftop projects across the state. The bid-submission deadline was originally set for February 16, 2018.

An official with BREDA repeated the same reason cited by the other two implementing agencies for the deadline extension, saying that the tender received very few bids.

The tepid bidder response in all three states reflects the regulatory uncertainty around trade cases that is plaguing India’s solar sector and creating difficulties for project developers.

“The proposed safeguard duty would immediately raise the cost of modules and the project cost depending on the level of tariff. A 70% safeguard duty could increase total project cost by over 35 percent but developers have no way of knowing what this additional cost could be so they can adjust their bids accordingly. It does not make any sense to take such a high risk when millions are at stake,” said Raj Prabhu, CEO of Mercom Capital Group. “But more importantly, the government agencies have not clarified whether, if safeguard duty is applied, it would be covered under the PPA change of law rules,” added Prabhu.

Further complicating matters is the petition for an anti-dumping duty that is pending before the Office of the Directorate General of Anti-Dumping (DGAD).

Commenting on the ambiguities of the market, a source of Mercom working with one of the largest players in the Indian solar sector warily said, “Look at the sector and what has been going on for the past few months. What are we supposed to factor in and what not? If that is not clarified, how will we bid?”

“If there is no clear guideline in writing whether the PPAs entered now will be sacrosanct and not be affected by safeguard duty, how are we supposed to bid? We cannot just bid for now. If safeguard duty is levied during the procurement, IPPs will have issues as module costs will spike. If the government can give us in writing that the PPAs entered before the levy of duty will be exempt from such a duty, then we can proceed smoothly,” an official working with another domestic solar project developer told Mercom.

Expressing his disappointment with the lingering uncertainties in the sector, a source working with another prominent project developer told Mercom, “If the government doesn’t take steps to resolve uncertainties, it will be tough auctioning projects as most developers, including us, are unsure about safeguard duty.

India’s solar sector logged unprecedented tender activity in January 2018, with more than 5.5 GW of solar PV projects tendered. However, a mere 20 MW of solar was auctioned during the month, according to Mercom’s India Solar Project Tracker.

There is a possibility that more tenders could be postponed in the coming weeks unless the sector gets clarity on the safeguard and anti-dumping duties.

According to 2017 Q4 and Annual India Solar Market Update, Mercom forecasts total installations to decline by approximately 22 percent year-over-year to approximately 7.5 GW in 2018 compared to 9.6 GW in 2017 due to uncertainty around the trade cases.