As the ongoing uncertainty around Safeguard Duty imposition looms large over the domestic solar sector, the Solar Power Developers Association (SPDA) has written to the commerce ministry seeking complete exemption of the duty for projects currently under development.

To give some context to the fate of Safeguard Duty, the Directorate General of Trade Remedies (DGTR) recently recommended a 25 percent safeguard duty on solar cell and module imports from China and Malaysia for the first year, followed by a phased down approach for a second year. In the first six months of the second year, a safeguard duty of 20 percent will be payable by exporters to India and in the latter half of the second year, exporters will pay a safeguard duty of 15 percent.

While the imposition of recommended rate of duty is still under consideration, the SPDA has now requested the complete exemption of the duty saying such a move can jeopardize investments worth ₹1 trillion and kill thousands of jobs.

Commenting on the development, Shekhar Dutt, the director general of SPDA, told Mercom, “With the DGTR’s recommendations of 25 percent duty, the industry is concerned about the thousands of MW of projects whose PPA/bids are closed and in many cases deliveries of modules are expected to commence shortly. SPDA has requested exempting such projects from payment of safeguard duty. We trust that the concerned authorities would take a rational decision on this issue in the larger interest of the National Solar Mission.

In a letter addressed to the commerce secretary, the SPDA said, “Such recommendations on Safeguard duty could jeopardize availability of low cost energy to the consumers. The duty could also kill thousands of jobs created from the down-stream activities of solar power generation including the manufacturing sector”.

According to SPDA, the viability of around 27,000 MW is at stake as the cost of these projects will be additionally burdened by the imposition. Moreover, the entire solar mission will lose its objective endangering thousands of jobs, many interdependent MSMEs catering their goods and services to this sector and finally turning these projects into NPAs (bad loans), as per SPDA.

In its letter, the SPDA also noted that in the conclusion of the final findings, the DGTR has also highlighted that “there will be impact on solar power developers and also on ultimate consumers as a result of safeguard duty on the product under consideration (solar equipment).”

The letter also highlighted that the submissions are not regarding appropriateness of the duty or its quantum rather. However, the association wants to draw attention towards applicability or treatment of this duty on the ongoing projects which have been allocated at the tariffs discovered under the competitive bidding process.

The SPDA also cautioned against the distribution companies (DISCOMs), saying that it is very likely that they will not take the burden of increased tariff and would certainly oppose any such pass-through in the tribunals and courts. “The DISCOMs will not purchase solar power as soon as the tariff increases above ₹3/kWh on account of safeguard duty”.

Earlier this year, the government amended the guidelines for tariff-based competitive bidding process for the procurement of power from grid-connected solar 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 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 entitled them to compensation by the other party to ensure that the power generator is not adversely affected.

The SPDA addressed the pass-through option saying, “Even if the revised bidding norms are to be interpreted to allow pass-through, the same is yet to be tested and established under regulatory process. The process is uncertain and time consuming and does not provide any assurance of relief to the developers.”