As the federal government considers imposition of anti-dumping and safeguard duties on imported solar power modules, Indian states have been forced to delay auctions for solar power capacity worth 2.2 gigawatts.
The states of Maharashtra and Karnataka have been forced to delay the deadline for submission of bids for 1 gigawatt and 1.2 gigawatt of capacity, respectively, after each received bids for just couple of hundred megawatts at the initial deadline for bid submission.
Government agencies in both the states have been forced to issue multiple modifications to the original tender documents with responses to several issues and concerns raised by project developers. Maharashtra State Electricity Distribution Company Limited postponed the auction four times, while the Karnataka Renewable Energy Development Limited has postponed the auction at least once.
Some of the concerns raised by the developers include no provisions in the tenders to allow post-facto change in tariffs in case laws are changed. The federal government is yet to take a final call on the safeguard and anti-dumping duties, and the cost of generation for successful bidders could significantly increase.
India’s solar power sector is overwhelmingly dependent on imported modules, with foreign-manufactured modules having a share of 90% of the modules installed in India. Any levy on imported modules will have a massive impact on almost all projects under construction or in planning phases.
India’s Directorate General of Safeguards Customs and Central Excise has already recommended a 70% safeguard duty on imported modules from some countries until the investigation is complete.
Solar power developers draw from the experience of thermal power generators who have fought long legal battles, and continue to do so to date, over a change in tariffs due to the increased cost of imported fuel. Companies like Tata Power and Adani Power have bid to set up some of India’s largest and most efficiency coal-based power plants using Indonesian coal. When the Indonesian government decided to significantly raise the prices of coal exports, these companies asked the Indian regulators to increase the electricity sales tariff. Buyers of the electricity opposed the move leading to lengthy and repetitive legal battles.
Apart from the issue of possible duties, developers may also be apprehensive about the state-level auctions as state power distribution companies can be irregular in making payments. State-level tenders do not have provisions for a payment security fund, which tends to push the tariff bids substantial higher compared to those seen in federal tenders.
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