Solar energy developers in the country have called for the government to withhold basic tariffs (BCD) on solar systems for the time being in the upcoming budget. They fear that this could ruin the government's ambitious goal of having 175 GW of renewable energy by 2022, which will require an investment flow of Rs 1.75 billion.
Industry estimates put Rs 1.75 billion investment to provide 35 GW of renewable energy capacity in the country. Around 50 GW of clean energy is currently being implemented, while India has already installed over 90 GW of renewable energy, including 37 GW of solar and 38 GW of wind.
India has an ambitious target of 175 GW of renewable energy capacity by 2022, including 100 GW of solar and 60 GW of wind. Finance Minister Nirmala Sitharaman will propose the general budget on February 1st.
At the beginning of June last year, Energy Minister RK Singh clearly indicated the government's intention to impose basic tariffs on solar systems and reiterated this.
Shekhar Dutt, director general of the Solar Power Developers Association (SPDA) said, “It is necessary to postpone BCD for solar panels until domestic manufacturers are mature. Given the current supply chain disruption due to the COVID-19 pandemic, reliance is on Import of modules must be reduced, precisely targeted by the Indian government through its Atmanirbhar initiative. ”
However, he said that developing enough solar research and development and producing efficient modules domestically at competitive prices that match the imported modules will take sufficient time. “Introducing BCD in the meantime will be counterproductive. Solar energy developers will have to import modules to meet contractual obligations at a much higher cost if they don't have the required domestic capacity,” he said.
The SPDA is also concerned about a sudden spike in unforeseen metal and alloy prices, making the (solar) project unprofitable. Dutt said world market steel prices have increased significantly due to the trade war between China and Australia. The Indian government has always protected the interests of the native Indian steel producers from the import of steel through tariff barriers and concessions from other states.
However, given the increasing global price realization, Indian steel producers would have resorted to capitalizing on and exploiting the situation through cartelization, as evidenced by the alarming rise in domestic steel prices for HRC and Galvalume steel (used in MMS structures).
He suggested developing a suitable mechanism, such as export restrictions, to deter companies from indulging in such behavior. The SPDA also wants a relaxation of the GST rate (goods and services tax) for solar PV projects.
The government intended to simplify the tax structure for the renewable energy sector. However, under the current tax system, solar projects, the segregation regards 70 percent of gross compensation as “value of goods supply” which attracts 5 percent of GST and the remaining 30 percent as “value of services which attract 18 percent of GST.
The effective tax rate is thus around 8.9 percent. The assumed rate of 70:30 only reflects the industry average, which is incorrect, as a proportion of the goods in the solar power project is almost 90 percent. Dutt said, “It is important to mention that taxes and levies such as the GST, which are levied by the government, actually increase the cost of electricity. This in turn leads to a cascading increase in the cost of manufacturing or living. This is counterproductive for national growth. We therefore call for a rationalization of the tax rate and the introduction of a 5 percent tax on a broad front. ”
Last year the government announced a liquidity infusion program for cash problems worth Rs 90,000, which was later expanded to Rs 1.2 billion. The funds should be released in two equal installments. Dutt suggested that the second installment of the system also be released as soon as possible. He also advocated a mechanism for the government to pass any outstanding amounts directly to the generators.
He asked for the passage of the Electricity (Amendment) 2020 Act to be accelerated. The discom reforms planned by the changes proposed in 2020 are still pending. Tulsi Tanti, chairman of the Indian Wind Turbine Manufacturers Association (IWTMA), said the panel has called for the restoration of accelerated depreciation of 80 percent for windmills and solar projects, especially MSMEs (small and medium-sized micro-enterprises).
He has also asked the government to add electricity generation and distribution by renewable energy equipment as a specific business under Section 35AD (Income Tax Act) that is similar to an infrastructure facility.
He also called for the restrictions on imports of balsa, the raw material for the rotor blades of wind turbines, to be lifted. The IWTMA has also strongly urged to stop dumping cheaper imported goods and encourage DTA (Domestic Tariff) buyers to buy their inputs from local SEZ (Special Economic Zone) units (rather than importing them) and said it was necessary to reduce the applicable duty for the clearance of goods from the SEZ to DTA is only 7.5% to 1 to 2% on average.
Also read: Budget 2021: The government is likely to formulate specific guidelines for the toy sector