A question mark has emerged on the trend of solar prices in India since the Center announced its decision to levy a basic FY23 customary (BCD) tax of 40% and 25%, on the importation of solar modules and cells, respectively. Given that modules account for about 60% of the total amount of money spent on solar plants, the use of Indian products instead of cheap Chinese modules by project developers is expected to lead to a rise in solar prices, experts say.

While domestic modules are priced at 29-30 cents per watt-peak (c / wp), modules imported from China come at 23-24 c/wp. In fact, the huge increase in solar power that India has seen in recent years has come about through the use of foreign products, especially from China. The government has now decided that all projects it will bid for after April 10 under central government schemes will have to get solar panels from companies that are part of the authorized list of models and manufacturers (ALMM). No external module manufacturers have reached ALMM yet.

“As commodity prices rise globally, as well as basic income tax on imported solar, solar energy prices will increase by about 20%,” said Amit Kumar, partner & leader, PWC India’s energy. “It is the first time that the rise in the price of solar panels is imminent and it will be exciting to see how solar developers in the country deal with it,” added Kumar.

Notably, at the first auction, held in March, after the Ministry of New and Renewable Energy (MNRE) announced the BCD levy on solar panels from FY23, Gujarat received a solar tax of Rs 2.20 / unit. In December 2020, the same state received a record low solar tax of Rs 1.99 / unit.

The role of imports in solar energy is reflected in the April-January period for the last financial year. The increase in energy during this period decreased by 45% to 4.8 GW. These months also saw, as a result of the Covid-19 limit, a 75.4% drop in solar energy imports to $ 392.8 million.

There is also the view that Indian machinery manufacturers have never passed all the technological advances to project engineers. “We need to see what benefits Indian producers can offer to Chinese suppliers when they start operating the basic tax (BCD). So far, they have been changing the prices of imported equipment from China, rather than supporting it in their production costs, ”Naveen Arora, AVP, told Amplus Solar to FE.

Best of all, the government has decided to abolish the 15% security law and its expiration in July will open an eight-month window free of import restrictions, before the BCD goes into effect on April 1, 2022. This is expected to lead to an increase in purchases of modules and cells from China, which facilitates ongoing projects.

Approximately 34 GW renewable energy (RE) projects fall under various phases of implementation and 30 GW under various bidding stages. In its latest report, the International Energy Agency (IEA) said the country should set new records for RE energy deployment in 2021 and 2022 by clearing the pipeline of projects released but could not be shipped due to coronavirus disruption. However, the IEA warned that “the current rise (April 2021) in Covid-19 cases has created uncertainty for short-term forecasts this year”.

Source: Financial Express