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 suggest that it will take up to Rs.175 billion 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.
ShekharDutt, General Director of the Solar Power Developers Association (SPDA), told PTI: “BCD for solar modules has to be postponed until local manufacturers are ready. With the current supply chain disruption due to the COVID-19 pandemic, there is a need to reduce reliance on import modules, which the Indian government is closely addressing as part of 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 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 imposed by the government, are actually increasing the cost of electricity. This in turn leads to a cascading increase in manufacturing or the cost of living. And is therefore counterproductive for national growth. We are therefore calling for a rationalization of the tax rate and the general introduction of a tax of 5 percent. “
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.