Safeguard duty of 25pc on solar projects to raise tariff: ICRA

Ongoing solar power projects in the country are expected to come under some stress if the DGTR recommendation on imposition of safeguard duty of 25 per cent is approved by the Union Power Ministry, rating agency ICRA said.

The capital cost for a solar power project will escalate by 15 per cent, and in turn, the tariff must be increased by about 30-35 paise per unit, to maintain a similar level of returns for the project developers, ICRA said in a note.

The DGTR has recommended imposition of a 25 per cent safeguard duty on solar cells (assembled into modules or not) imported into India from China and Malaysia in the first year.

This would be followed by a gradual reduction to 20 per cent in the first six months of the second year, and further to 15 per cent in the latter half of the second year.

However, this is lower than the 70 per cent duty recommended by the Directorate General of Safeguards in January 2018, with a view to balance the interests of domestic manufacturers, as well as the solar power developers and consumers.

"For existing domestic solar cell and module manufacturers, the imposition of safeguard duty would be a positive development, as it would lead to an improvement in their competitiveness against the cheaper imports.

"However, given that the safeguard duty is applicable only for a period of two years, this is unlikely to lead to any material increase in the domestic solar module and cell manufacturing capacity," ICRA group head-Corporate Ratings, Sabysachi Majumdar said in the note.