Nearly half the solar power capacities under implementation worth Rs 280 billion face viability risk with the rupee's steady fall which has made imported solar modules costlier and hiked the cost of setting up solar plants, said a report released on Monday.
A Crisil report said these projects include 5.5 giga watt (GW) of projects bid in the past nine months at very low tariffs of Rs 2.75 per unit or less.
They are in the early phase of implementation and unlikely to have bought solar modules for orders which are typically placed 9-12 months after bids are won, the report said.
"Solar modules account for 55-60 per cent of the project cost of a solar plant, which is typically Rs 50 million per mega watt (MW)," said Subodh Rai, Senior Director, CRISIL Ratings.
"Today, over 90 per cent of them are imported. Our analysis shows that for every 10 per cent drop in the rupee, the cost of setting up a solar power plant increases by Rs 3 million per MW, assuming other factors remain unchanged," he said.
Also, developers typically do not hedge the exchange rate before placing orders for modules.
"If the rupee remains weak and safeguard duty is also levied, project costs would dart up by as much as 20 per cent. In such a situation, viable tariff for future projects will have to be higher by 30 paise per unit," the ratings agency's Director Manish Gupta.
This would impact the government's target of setting up 100 GW solar capacity by fiscal 2022, he added.