MPUVNL Issues Clarification on safeguard Duty on Rooftop Solar Tenders

MPUVNL issued the clarification after many bidders raised questions regarding the methodology which could be adopted to assess the impact of safeguard duty on the tariff being determined through MPUVNL’s RESCO tender.

In the first official case of the actual impact of safeguard duty on tariffs,  the Madhya Pradesh Urja Vikas Nigam Limited (MPUVNL has finally put a number out there.  And according to them, the impact is 5.2%. Though issued for their rooftop tenders, the number is nevertheless relevant, as subsequent impact assessments for rooftop in other states, and even large grid projects. The clarification followed MPUVNL’s first ever tender for 33 MW of grid-connected rooftop solar PV project.

The government had levied 25% duty on solar panel imports from China and Malaysia, besides developed countries. However even as the Odisha High court will hear the matter today, the MPUVNL officials have proactively put the clarifications to help power producers understand the duty imposition on their calculation. The following calculations have been used to explain by MPUVNL.

This adjustment in tariff because of change in capital cost will be given until three months prior to the scheduled commissioning date of the project as provided in the PPA.

Probable Impact of Safeguard duty on solar cells

Here is how MPUVNL has calculated the impact of variation in capital cost for a 100kW system –

 

  Benchmark cost of 100kW system = ₹55,00,000

Applicable tariff for the year = ₹Y/kWh

Approximate Cost component of solar cell in the capital cost = 26% X 55,00,000 = ₹14,30,000

Increase in cost of solar cell as a result of Safeguard Duty = 25% X14,30,000= ₹3,57,500

% increase in the above cost when compared to benchmark cost = ₹3,57, 500 / 55,00,000 = 6.5%

Since the above variation is more than 2.5% threshold as allowed in the RFP and PPA, increment of 6.5% will be considered for tariff adjustment due to change in Capital Cost.

% Adjustment in tariff due to change in capital cost = 6.5% X 80% = 5.20%

Adjustment in tariff due to change in capital cost (₹/kWh) = 5.2% * Y

MPUVNL has successfully identified 567 project sites for the program, which have been divided into 27 project groups and bidders can place bids for more than one project group, giving them the option to submit up to 27 storage bids along with individual bid securities.

The July end imposition of safeguard duty on solar cells imports from China and Malaysia have become a bad news for solar developers, across the country. Throw in the confusion by Odisha Hight Courts’  stayon the duty, developers have been sweating on repercussions on the business, adding to uncertainty in the market.

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