Waive Import Duty On Solar Modules For Pre-March 2021 Projects: Pinaki Bhattacharyya
India's demand for power touched an all-time high of 220 gigawatts in April and May this year, causing a severe power shortage across states. Yet, 15-gigawatts of renewable energy projects lack long-term power-purchase agreements.
This capacity auctioned before 2021 has become unviable on account of basic customs duty imposed on import of solar panels and cells effective April 1, 2022, Pinaki Bhattacharyya, founder, managing director and chief executive officer at AMP Energy India, told BQ Prime.
If the levy is waived for the projects bid before 2021, when the duties were notified, that it will immediately bring 15 GW of projects on-stream and have a positive impact on power shortage issues in the near future, he said.
India had imposed the duty to boost domestic manufacturing of solar modules, besides offering production-linked incentives
Edited excerpts from the interview:
In the light of high commodity prices and duties, how are renewable companies coping?
Pinaki Bhattacharyya: Given the current situation in the country, the whole purpose of the government to create an elaborate plan for India to transit to renewables is somehow defeated.
In the backdrop of higher commodity prices and export duties, the price of equipment–panels and cells–has gone back to what they were five years ago.
The situation is further compounded by export of domestic capacity by manufacturers when projects under Atmanirbhar Bharat Plan are 1.5-2 years away from commissioning.
This has led to an increase in power price to the end consumers, making projects completely unviable. There are at least 14-15 GW projects bid before March 2021 that are lying idle without PPAs on account of 40% basic customs duty (BCD) on import of panels.
What is the way out for these projects? Do you think bringing these projects online will help India meet its power shortage crisis in the future?
Pinaki Bhattacharyya: Government must focus on project execution so that all the tied-up capacity comes online, and industry must get the renewable energy they were promised.
For bids that were auctioned before March 2021–when the notification on BCD and safeguard duty was made–government must provide the grandfathering clause to waive such duties from such projects.
This will result in low cost power for consumers and power distribution companies. It will immediately clear the PPA signing backlog and protect the interest of the developers and investors, as project costs will not be affected.
When can we expect domestic capacities to replace India's 85% import dependence for solar panels?
Pinaki Bhattacharyya: We need to promote manufacturing. However, the imposition of trade barriers or any new taxes increases the power cost for discoms and consumers alike.
Reduction in GST rate on solar equipment, removal of 25% import duty on solar cells, and reduction in import duties on modules to 25%—from 40%—will help in cost realisation for manufacturers as well as builders who import panels from abroad.
Additionally, export duty can be imposed on modules (similar to steel), which can help make the prices of modules viable and also ensure supply in the domestic market. The aim should be to endeavour for global competitiveness and not just meeting domestic demand.
Rooftop solar has failed to keep pace with utility scale solar installations. Similarly, wind power capacity also failed to maintain its past momentum. How can this be reversed?
Pinaki Bhattacharyya: The 40 GW rooftop target by end of 2022 should be converted to commercial and industrial target, and the gap in the capacity for rooftop solar can be plugged by considering open access and corporate power purchase agreements.
The government must promote corporates to buy renewable power directly from the developers. This would bring huge foreign investments into the country to build renewable energy projects, reduce the cost of manufacturing of the industries in India, and share the load with the utilities and discoms to meet the 175 GW target.
Energy storage is also essential in providing reliable clean energy as wind and solar alone are intermittent power available only during day or night. Government must provide subsidies to the storage projects to make it viable and bring it at par with other segments.
To revive wind installations, some course correction needs to be done. Duties must be removed or reduced. Instead of reverse bidding, the floor price must be fixed, or states should look at feed-in tariff instead of tariff-based competitive bidding for all wind projects.
The government must realise that the power plants generating power in India are also making power in India and technically, promoting the Atmanirbhar (Bharat) scheme. Promoting one segment over the other would not help build a favourable ecosystem. Hence, we all must move ahead together.
(Corrects an earlier version that misspelt Bhattacharyya's surname)