In an order issued on 13th February, the power ministry has decided to extend the waiver of inter-state transmission fees and losses incurred on transmission of electricity from wind and solar sources.
The waiver is applicable for 25 years for all those solar and wind projects which will be commissioned till 31st March, 2022. Earlier, the waiver was to conclude in 2019.
The waiver is subjected to the following conditions –
The waiver is applicable for all those solar & wind projetcs that are entering into PPAs with any entity including DISCOMS
The waiver will be allowed to only those wind and solar projetcs which are awarded through competitive bidding process in accordance with guidelines issued by the Central Government
This move is probably the first positive sign for the renewable energy industry this year. The Budget did not hold any jackpots so as to speak for the renewable energy industry.
Also, the last few months have held a lot of uncertainty for the Solar Sector with the Director Safeguards imposing a 70 % tariff on Chinese modules with little clarity on the future of imported modules lying at the ports for commissioned projects. The order was stayed by Madras High court but no decision has since been announced.
With the rollback of duty on tempered glass and waiver of transmission fees and losses, one does wonder if the 70% safeguard duty on Chinese modules might just become a reality.
In a previous post, we had discussed the pros and cons of a 70 % safeguard duty on solar modules being imported from China.
On January 19, the Madras High Court admitted Shapoorji Pallonji’s petition against safeguard duty and issued a temporary stay on the implementation of the recommendation, Economic Times Reports.
The petition claimed that since Shapoorji Pallonji was not given an opportunity to place its viewpoint before the DG Safeguards, the findings were “illegal, arbitrary, without authority of law and in contravention of the Customs Tariff Act”.
The High Court is likely to announce its decision on 13th February as per a report in Economic Times.
In a blog post published in January, we had discussed the expectations of the Renewable Energy Sector from the Union Budget 2018-19.On 1st February 2018, Mr. Arun Jaitley – India’s Finance Minister, presented the budget. We think that the budget is fairly average and non-committal as far as renewable energy sector is concerned. While, solar energy retains the focus that it has been getting over the last few years, wind and other forms of renewable energy stand neglected.
We will discuss the highlights of the budget and what it holds for the Indian Renewable Energy Industry:-
DISCOMS/Licensees to purchase surplus electricity from farmers
The finance minister in his speech mentioned that state governments will be encouraged to place a mechanism, so that Surplus solar power is purchased from farmers by DISCOMs(or Licensees) at reasonable remunerative rates.
A report in downtoearth.org notes that the pioneer for this practice was a farmer in Thamna village of Anand district, who installed a solar power pump to save Rs 500 per day on diesel and managed to sell surplus power to a discom. The Solar Pumps are an empowering upgrade from electric and diesel pumps. Electric Pumps are unreliable as electricity cuts lend the farmers helpless, while diesel pumps are expensive and eat into the revenue of farmers. On the other hand, solar pumps require the farmer to pay just 10% of the cost upfront.
According to a report in Indian Express, the first solar cooperative of India, in Village Dhundi (MP), managed to sell 98000 units of surplus electricity to Madhya Gujarat Vij Company Ltd (MGVCL). This surplus electricity is worth a cool Rs 6.8 Lakhs. The solar panels were installed for facilitating irrigation and this diversion of electricity to the grid additionally prevented overdrawing of groundwater. It’s a win-win situation. During an interaction with Livemint, Mr. R.K. Singh, secretary MNRE, said that he foresees speedier credit of subsidies for DISCOMS in the near future.
Elimination of custom duty on solar tempered glass
In January last week, we had discussed the pros and cons of DGS’s recommendation of a 70% safeguard duty on Chinese solar modules. This recommendation seeks to protect domestic manufactures from Chinese modules which were far cheaper and far more favoured by Solar Developers.Now, the budget 2018-19 has eliminated import duty on imported tempered glass which constitutes approx. 33% of the total cost of a solar module. The rollback of customs duty is expected to decrease the price of modules manufactured by domestic manufacturers. This move shows that the Indian Government wants the Indian Solar Manufacturers to be a part of the solar growth story. This decision is good news for Solar Developers too who were unhappy with the safeguard duty as it was a threat to their profitability.
We will quickly give you the numbers. The budget outlay for Wind Power (Grid Interactive) is 750 cr which is the same as the budget estimate for 2017-18. The budget notes state that the amount is for the past liability for GBI(Generation based incentive) Scheme, which has been discontinued from 1st April, 2017.For off-grid, the budget is Rs 7.5 crores with a comment which states that small wind energy & hybrid systems program is being discontinued from this financial year. The budget is required for clearing pending liabilities only. From what we understand, the government has not allocated any funds for new wind projects. Perhaps, along the year we will see an increase in expenditure on the wind industry.
The government hopes to add 11000 MW of solar power to the grid this year with a budget of Rs 2045.25 cr. We can give you more figures, however, the revised estimates always tell a different story. You can check the detailed outlay on page 103 of Indiabudget.nic here
It was most disappointing to see that the budget for Human Resource Development and Training under MNRE has been rolled back from 70 crores in 2017-18 to 60 crores in 2018-19. A major purpose of this scheme was to train Suryamitras.
OUR TAKEAWAY FROM THE UNION BUDGET 2018-19
The most interesting bit of the budget speech on 1st February was the government’s commitment to install more solar pumps in the country by way of making it a revenue-churning scheme for farmers. It is a noble thought and one hope works. The solar pumps are a big investment for farmers which makes it imperative for the state government to clearly specify a feed-in tariff. The Feed-in-tariff will prevent disputes and loss of revenue for farmers. The government should also streamline subsidies so that they reach the farmers as soon as possible. Our farmers are a stressed lot and it is time that the government does good to them by ensuring that the subsidies are credited on time.
Another interesting development was the elimination of custom duty on tempered glass imports used in solar modules. The government seeks to give a much needed impetus to solar manufacturers and developers by helping in producing cheaper modules to keep the solar momentum going.
Last year, solar tariffs in India touched an all time low of Rs 2.44 Per unit i.e. 4 cents per kWh. This tariff was lower than coal at Rs 3.20 Per kWh, as reported by Economic Times .Experts said that a major reason for the fall in tariffs was availability of cheap solar modules from China.
On 5th January 2018, Directorate General of Safeguards Customs and Central Excise (DGS) recommended a 70 % provisional ‘safeguard’ duty on Solar Module/Panels imported from China, Malaysia and Taiwan. This news was received with much criticism from the Solar Developer community.
Since the news about the recommendation on ‘safeguard’ duty has come in, speculations are rife that Solar tariffs will rise again.You should know that solar modules account for nearly 60 % of the project cost so a change in price of module will impact the cost of production greatly. An article in Business Line quotes a Crisil Ratings Spokesperson talking about the impending rise in tariffs “The 70 per cent safeguard duty proposed will also inflate project costs by 25 per cent and crank up the viable tariff to Rs. 3.75 per unit from around Rs. 3 estimated earlier, making solar power less attractive to discoms. That would also be more than the average power purchase cost of 10 out of 14 discoms last fiscal.”
The most upsetting facet of this recommendation is that it puts to risk projects worth Rs 12000 Cr (and around 4 GW) as reported in the same article. These projects were auctioned in 2017.
We certainly hope that if the approval does come in for the DGS recommendation then the projects auctioned in 2017 are spared from the import duty.
Now, every coin has two sides. While the Solar Developers are unhappy with this recommendation, the domestic solar panel manufacturers are praying for an approval from the Finance Ministry.
According to the Preliminary Findings published by DGS, just about 53% of the production capacities of domestic solar manufacturers was utilized upto Sept, 2017. The finding is not surprising because Indian manufacturers held just about a meagre 10% market share in India.
As you may have guessed, employment in the domestic industry has taken a hit. The DGS report mentions how employment is on the decline when it should be rising. The same report also explains how a price cut by Chinese Imports has stopped Domestic Manufacturers from fixing a price that would help them break even. All-in-All, the last few years have painted a dreary picture for domestic manufacturers, while the country was going Ga-Ga over falling solar tariffs.
The Report emphasizes that a decrease in export of Chinese Solar Panels to USA & EU has led to a surge in Chinese Exports to India. In H1 2016, China was exporting 18.51% of its solar modules to India which grew to an astounding to 38.77 % by 2017 H1. If this figure surprises you then hold your breath right there, China’s exports to USA and EU fell from 30.65 % in 2016 H1 to a minuscule 5 % in 2017 H1.The anti-dumping duty and countervailing duty in USA against Solar Imports and Protective Measures in EU have channelized China’s energies to capture the Indian Market.
The Final question is that who should the government side with? Developers or Manufactures? Why don’t you tell us in comments.
In our First Blog Post, We did a comparison between India’s Growth in Renewables against Global Growth using 2 different parameters. The first parameter showed the global growth inclusive of China’s contribution while the second parameter showed India vs World growth excluding China. Such has been China’s meteoric rise that it seems unfair to turn it into a benchmark for other countries.
On 5th Jan 2018, the DGS recommended a 70% safeguard duty on Imported Chinese Modules. An article in Bloomberg has reported how India bought a third of China’s $8 billion of shipments from January through September in 2017. These numbers have been sourced from a BNEF research. The seriousness of the situation was first realized in August 2017 when Economic Times reported that the DGAD is considering taxing Chinese Solar Module Manufacturers and Wind Energy Equipment Manufacturers. The application was filed in June 2017 against China, Malaysia and Taiwan.
The finance Ministry has not yet approved the tax on Solar Modules. If the tax is approved, it will spell relief for Indian Panel Manufacturers but slow down the growth of the Indian Solar Industry. The speculations have left Solar Developers in despair.
An Important news that has streamed in this week, reported by Livemint,Donald Trump has levied 30% tariff on imported solar cells and module in the first year, with the duties declining to 15% in the fourth year. Lets see how this decision affects Solar module Prices globally and especially for India.
As mentioned earlier in the post, the tax is pending an approval from the Finance Ministry. This was not the first appeal registered by Indian Solar Manufacturers.Here’s a Snapshot of the appeals made since 2012 against cheap Imports from Neighboring South Asia countries countries as reported by Business Standard. What needs to be seen is that Will the Solar Manufacturers be lucky to have their way this time around?
2012: First case of dumping filed by group of indigenous solar cell & module makers
May 2014:DGAD identifies injury to tune of 60-110% by the US and China, finalises anti-dumping duty
June 2014: Finance ministry did not impose the duty, let it lapse
July 2014: Piyush Goyal urges domestic industry to drop case, assures enough demand pipeline| 950 Mw projects for domestic industry during 14-15
September 2016: WTO rules against India to have a separate solar programme for the domestic solar cell & module industry.
In our next blog post, we will discuss the repercussions of the Import Tariff levied by the Indian and American Government on the Indian Solar Industry.
The blog was updated on 26th Jan at 9:49 to change the import duty from 7.5 % to 70 %