Renewable energy capacity addition tumbled 49 per cent during April-February period of FY 19 to 6000 Mw compared with 11,800 Mw added in the same period of 2017-18, data sourced from the Ministry of New & Renewable Energy (MNRE) showed.
Though tariffs for both, solar and wind power, fell to historic lows of Rs 2.44 per unit, the lack of clarity in policies for the renewable energy sector affected fresh capacity addition. The deadlock on the duty structure cleared recently when the government on April 1, 2019, levied an anti-dumping duty of up to $1559 per tonne on a certain kind of sheet used in solar cell making. The levy would apply to imports from China, Saudi Arabia, Malaysia and Thailand. The anti-dumping duty, to be valid for five years, is seen as a protectionist step to safeguard the interests of local producers from the swarm of cheap imports.
Apart from the import duty, solar power has been buffeted by goods & service tax (GST). A study released by the Council on Energy, Environment & Water (CEEW) and the International Institute for Sustainable Development (IISD) has found that solar photovoltaic generation costs have gone up by 6 per cent since the introduction of GST. Paradoxically, GST has resulted in pulling down the cost of thermal power generation by 1.6 per cent, thus affecting India’s clean energy transition.
“Between FY2019 and FY2023, solar power capacity addition is projected between 48-50 Gw. The forecast for solar power growth in the near future remains sombre as investor sentiment has been negatively impacted due to policy issues emanating from GST and arbitrary cancellation of bids- a trend contrarian to the supportive practices of the government”, said a recent report from CRISIL Research.
“There were frequent bid cancellations, lack of clarity on GST procedures, and cost pressure from the imposition of the safeguard duty on imported cells/modules. While GST clarity was lacking for over a year with a final decision taken in December by the GST Council, it ended with an increase in taxation compared to what was expected by the industry. Similarly, the safeguard duty has turned out to be a double whammy of sorts, impacting costs of solar power projects and not resulting in any significant offtake for the domestic manufacturing sector”, it added.
Close to 4.7 GW was cancelled in such a manner over March to December 2018. Over and above the GST, the imposition of safeguard duty has affected project costs by 10-15 per cent and consequently led to a rise in bid tariffs.