Taking note of confusion created by safeguard duty the government wants to ensure that the duty if imposed, will be prospective and won’t hurt the ongoing solar power projects. The confusion was a result of Directorate General of Safeguards recommendation of 70% duty on solar cell imports. If the duty is applied retrospectively, capital expenditure on solar power plants will go up by 38-42%.
During CY 2017 some of the bid for eight solar power projects had sent the tariffs lower than INR 2.50. Winner’s tariff ranged between INR 2.44-3.30 per unit. A 70% safeguard duty will shift the band to INR 3.25-4.79 per unit.
The graph compares the as is the case with as can be the case of 2017 solar power tariffs. Even lowest solar power tariffs will go beyond INR 3 on levy of safeguard duty.
But that now looks like is not going to happen.
Solar power tariffs may still go up in FY19
In May 2017 when developers went to Bhadla solar park auction, the tariffs fell to a record low in a quick succession- from INR 2.62 to INR 2.44. To this day INR 2.44 remains the lowest solar tariff in India. In December 2017, when developers went for the same auction again the tariff rose slightly- INR 2.47-due to GST effects. Despite a change in the taxation regime, the tariff rise was not as high as the solar power developers had anticipated. What this indicates is that the solar market has stabilised to the changes from GST.
Concerns over safeguard duties will also subside now. But what happens on the anti-dumping front is going to remain a mystery for a while. Therefore solar developers will continue to perceive higher risks in the upcoming tenders. Unless the government clears its stand on ADD risk perceptions will persist. Currently, there is a contemplation of 7.50% ADD on solar imports from China. To avoid any last minute shock developers will quote higher solar power tariffs.