This was Expected
!
Economic Times ( 21 March ) carries following news :
Maharashtra’s latest
1,000 MW solar auction received bids of only 530 MW and thus had to be postponed for the fourth time
Similarly, Karnataka’s
1,200 MW auction for projects at the Pavagada Solar Park drew bids of only 550 MW at the second effort
REASON ?
With
over 90% of solar equipment being imported, solar developers have become
cautious ever since the Directorate of Safeguard Duty, reacting to a complaint
from local solar manufacturers, proposed imposing 70% safeguard duty on imported solar
panels in January this year on the grounds that such imports were crippling
local industry
To get a clear picture of the current “ Solar Stalemate “ , let us turn to the following news :
Arguments advanced by Solar Manufacturers Association ( ISMA ) for levying 70 % Safeguard Duty , are as follows :
·
At current prices and import trends, it will
result in net foreign exchange outflow of Rs. 2.44 lakh crore, or approximately
$45 billion. India currently has the third largest solar installations in the
world after China and the US.
·
The US and the EU have imposed duties on import of cells and
modules from China. Consequently, China’s solar gear exports to the US and EU
have declined from 31.87 per cent in 2014 to 4.74 per cent in 2017.
·
At the same time, China’s exports to India have grown
exponentially, from 2.92 per cent in 2014 to 32.32 per cent in 2017. Chinese
companies tend to bring down prices significantly and push out the local
manufacturers, according to ISMA.
·
India’s solar programme is currently
China-centric, accounting for nearly 90 per cent of market share directly or
indirectly through their off-shore companies.
This news report goes on to add :
·
Safeguard duty on imports from China will result in immediate
investments in manufacturing capacities in India. The industry estimates that
in 18 to 24 months, India will have an integrated solar manufacturing ecosystem
with an annual capacity of 15 GW. This will result in 250,000 new jobs.
·
India will emerge as a viable supply base of solar products for
global markets with a potential to export $1.5-2 billion annually, according to
industry players.
But it also says :
·
India will emerge as a viable supply base of
solar products for global markets with a potential to export $1.5-2 billion annually,
according to industry players.
·
“We estimate that safeguard duty may result in a temporary increase of Rs. 0.50 per unit of
power, which will progressively get neutralised as
manufacturing capacities get ramped up in India,” said ISMA.
MY TAKE :
* If Safeguard duty were to result in “ a temporary increase of Rs 0.50 per unit “ ,
why
there are no bidders in Maharashtra / Karnataka
?
And
this despite Power Minister, Shri R K Singhji saying :
“ The duty structure prevailing on the day of
the bid shall be implemented. Any
change in taxes and duties , would be passed
through.
Current
bidding document provides for passing through taxes only
We
would provide for passing through taxes and duties “
{ Source : DNA / 15 March / Govt to amend solar bid
rule to allow pass-through of duty hike
}
But ,
it appears that the DISCOMS are not happy and if anything , want to
renegotiate , even already entered PPA , downwards , since prices
of solar panels
imported from China , between July-Dec 2017 ,
has actually fallen by 25 % !
·
To meet its target of 100 GW of solar by 2022 ,
India must add 1.5 GW every month , for the next 60 months .
·
That means , in the next 24 months, it needs solar
panels for adding 36 GW
According to ISMA , it will take its member companies to achieve annual
manufacturing capacity of 15 GW , in those 24 months !
Considering the following news report , is this likely to happen ?
{……domestic production stood at 246 mw in FY15 and is likely to increase to
1,164 mw in the
current financial year 2018 }
Given this background , if a Safeguard duty is imposed, it is bound to result
in our missing the target.
What would that lost generation ( possibly 40 GW - 50 GW ) cost our economy ?
How many more jobs could our economy have added with that 50 GW ? and that too , at a tariff of Rs 2.44 per unit ?
And if that tariff was to fall to Rs
1.5, could we possibly create a MILLION jobs ?
·
At present, customs duty on solar cells / modules /
panels is levied at 7.5 %
and, despite this , imported
solar cells / modules / panels are 25 – 30 % cheaper
than
local products !
In light of this background , questions that the Policy Makers may want
to ask, are :
·
Between the full scale solar projects manufacturers
and the roof top solar project manufacturers , there are about 11 local companies .
How many persons do these
employ , whose jobs are getting threatened by
cheap imports from China ?
·
How many more jobs can we create , if we succeed in
installing 50 GW of solar ( with imported supplies ) in the next 24 months ,
instead of just 2 GW ( with local supplies ) ?
·
If per unit price of solar were to GO UP from Rs 3.5
to Rs 4.0 , how much will our economy
become “ expensive “ , and how will that impact our exports ?
·
On the other hand , if we altogether abolish that
current custom duty of 7.5 % ( on the imports from China ), can we possibly BRING DOWN the currently quoted tariff from Rs 2.44 ( Bhadla in
Rajasthan ) to Rs 1.5 per
unit , and turn India into a LOW COST
ECONOMY ?
27
March 2018
www.hemenparekh.in
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