SPDA seeks exemption from safeguard duty on equipment

Solar Power Developers Association (SPDA) has sought complete exemption of safeguard duty on solar equipment for an ongoing project, saying such a move can jeopardise investments worth Rs one lakh crore and kill thousands of jobs.

This comes after the Directorate General of Trade Remedies (DGTR), in its recent report, recommended imposition of safeguard duty on imports of solar cells/modules into India for a period of two years.

This duty would be 25 percent ad valorem in the first year, 20 percent ad valorem in the first half of the second year and 15 percent ad valorem subsequently.

However, the safeguard duty has not been imposed so far.

Earlier this year in January, Directorate General of Safeguards (DGS) had recommended imposition of 70 percent safeguard duty on import of solar equipment.

The SPDA has been pleading for keeping solar equipment out of the purview of the proposed safeguard duty, particularly for ongoing projects.

In a letter to Commerce Secretary, who is also Chairperson of the Standing Board on Safeguards, on July 18, 2018, the SPDA said, "such recommendations on safeguard could jeopardise the availability of low-cost energy to the consumers, making the investments of more than Rs 1 lakh crore unviable.

The duty could also kill thousands of job created from the downstream activities of solar power generation including the manufacturing sector, it added.

The SPDA pleaded to the board to protect ongoing solar energy projects (wherever bids concluded) with complete exemptions from the imposition of any safeguard duty.

According to SPDA, the viability of around 27,000 MW projects involving the investment of more than Rs 1 lakh crore is at stake as the cost of these projects will be additionally burdened by 20 percent with present recommendations on safeguard.

Consequently, the entire solar mission will lose its objective endangering thousands of jobs, many interdependent MSMEs catering their goods and services to this sector and finally turning these projects into NPAs (bad loans), as per SPDA.

India has set an ambitious target of having generating 100 GW of solar energy by 2022. The government has planned to auction 60 GW solar energy projects by March 2020 to achieve the target.

The SPDA pointed out that in the conclusion of the final findings, the DGTR has also highlighted that "there will be an impact on solar power developers and also on ultimate consumers as a result of safeguard duty on the product under consideration (solar equipment).”

The body said that at this stage, their submissions are not regarding the appropriateness of the duty or its quantum rather they want to draw attention towards applicability or treatment of this duty on the ongoing projects which have been allocated at the tariffs discovered under the competitive bidding process.

In April 2018, the Ministry of New and Renewable Energy had issued a clarification regarding “change in law” clause of competitive bidding guidelines for solar projects and whereby duties and cess words have been added in the said clause.

The body pointed out, "Even if the revised bidding norms are to be interpreted to allow pass-through, the same is yet to be tested and established under regulatory process. The process is uncertain and time-consuming, and does not provide any assurance of relief to the developers."

The SPDA also said that it is very likely that distribution companies (discoms) will not take the burden of increased tariff and would certainly oppose any such pass-through in the tribunals and courts.

Moreover, it said that the discoms will not purchase solar power as soon as the tariff increases above Rs 3 per kWh on account of safeguard duty.