Keep existing solar projects out of safeguard duty scope, say developers

Solar power developers have not had it easy over the past six months.  Even as they continued to bid, with the possible disruption of safeguard duties hanging over their heads,  the delay took its toll. Some of them have tried to include a clause on pass-through of any fresh duties after winning tenders, but even that was met with fierce resistance from the competent authorities.

So in January this year, we saw 70-75% safeguard duty being recommended by the DG of Safeguard Customs and Central Excise in January influenced by the ISMA (Indian Solar Manufacturers Association). This obviously silly suggestion collected dust, and finally last week the Directorate General of Trade Remedies (DGTR) presented a proposal which recommended a 25 percent safeguard duty on solar cell and module imports from China and Malaysia for the first year (click here to read that report).  These are levels that, by virtue of their scope and structure, have tied to keep everyone happy. Or so we thought.

Reports have now come in that the Solar Power Developers Association (SPDA) has written to the commerce ministry seeking complete exemption of the duty for projects currently under development. The SPDA repeatedly stressed on the fact that any such move right now would easily endanger investments worth over ₹1 lakh crore and kill thousands of jobs, even though the implementation of the recommended duty rate is still only under consideration.
In their letter addressed to the commerce secretary, the SPDA stated, “Such recommendations on Safeguard duty could jeopardize the availability of low-cost energy to the consumers. The duty could also kill thousands of jobs created from the downstream activities of solar power generation including the manufacturing sector”.
The SPDA also noted that in the conclusion of the final findings, the DGTR had also highlighted that “there will be an impact on solar power developers and also ultimately consumers as a result of safeguard duty on the product under consideration (solar equipment).” If their figures are to be believed, the viability of around 27,000 MW is at stake as the cost of these projects will be additionally burdened by the imposition.

It was made clear that the association doesn’t hold any questions against the decision made by the DGTR based on duty. They just want to bring the attention of the industry and ministry more importantly on how this duty would be applicable on ongoing projects which have been allocated at the tariffs discovered under the competitive bidding process. Asking the ministry for the sort of treatment these projects would receive.

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,” read the letter.

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

However, the SPDA voiced their concerns over the method 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.”

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