Safeguard duty will make solar power less competitive: Teri

The imposition of safeguard duty on imported solar panels will result in higher cost for future solar power projects, impacting the sector's competitiveness, The Energy and Resources Institute (Teri) said today.

This move is also likely to result in higher average power purchase cost (APPC) for the buying utilities and higher costs to the consumers, Teri said in a statement.

According to the statement, over 90 per cent of solar panels and modules used in Indian projects come from China and Malaysia, and the proposed safeguard duty is intended to protect domestic solar panel production from impacts due to increased imports.

It said that duty on imported modules will increase solar power tariffs by around Rs 0.38 to Rs 0.50 per unit.

"Levying of safeguard duties may not help the domestic industry. It would on the other hand, increase cost of solar power, making it less attractive to the buying utilities, and thus jeopardising the pace of growth of development of solar power...," Teri Director General Ajay Mathur said.

A better option for the government to promote domestic industry is to competitively procure, for its own use, solar electricity generated from only domestically manufactured panels, he added.

India's solar industry is growing rapidly and is one of the cornerstones of a sustainable future for the country. However, the industry is still at a nascent stage and requires constant policy support for a favourable environment for growth, it added.

As per the Ministry of New and Renewable Energy (MNRE), the present domestic manufacturing capacity of solar cells and solar modules is about 3.1 GW and 8.8 GW, respectively, whereas the 1.5 GW of solar cells and 2.0 to 3.0 GW of solar panels are installed annually; only 10 per cent of the installations use domestic cells and modules, the statement said.

The main reason for under-utilisation of the installed domestic manufacturing capacities is the inability of domestic manufacturers to compete with foreign manufacturers due to lack of economies of scale, technology performance and higher cost of the capital borrowed from banks and NBFCs, it added.

It also suggested that the government needs to balance the solar deployment targets and needs of solar manufacturing industry.