The Indian government plans to abolish the guarantee tax on solar panels

    The Indian Central Government’s decision to cancel the guarantee tax on solar panels will reduce module costs by 14.1% and restart Complete Home Solar System Kit project implementation at full speed.

    Indian solar developers said that due to price increases, project implementation has slowed down.

    An executive member of the Rajasthan Solar Energy Association said: “As panel prices have risen by 30-40%, many projects are progressing slowly. The projects are bid at a certain price to maintain investment and profit. But when the panel prices differ by as much as 40% At that time, the feasibility of the project became untenable. It is hoped that the cancellation of the safeguard tax will speed up the implementation of the project."

    Similarly, project implementation was also affected during the blockade caused by the epidemic.

    Rising costs

    At the end of June, according to data from Crisil Ratings, rising module prices may reduce the winning return of the 12GW solar project by 200 basis points and increase the price of electricity per unit of future bids by 10 to 15 paisa.

    Solar modules account for more than 50% of the total project cost, most of which are imported. Therefore, significant differences between its price and exchange rate and those expected at the time of bidding may bring feasibility risks to the project. Developers usually purchase modules and related components 9 to 12 months after winning the auction.

    This huge gap puts the project at risk of fluctuations in solar panel prices and currency exchange rates. Crisil estimates that since March 2020, 12 GW of projects have been bidding at a low price of less than Rs 2.50 per unit. However, as these projects approached the module procurement stage, the price showed a reversal trend. In June, the module price soared to US$0.24 per watt, which was a 10% increase since January.

    Safeguard tax

    For a long time, India has imported most of its solar cells and modules from neighboring China. In order to support the local manufacturing industry and reduce its dependence on imported products, on July 30, 2018, India announced a 25% safeguard duty on solar cells and modules imported from China and Malaysia. The tariff rate for the first year is 25%, and the tariff rate for the second year is gradually reduced. This rate is reduced by 5% every six months until the end of July 2020.

    In July 2020, the Ministry of Finance of India issued a notice to impose a safeguard duty (SGD) on imports of solar cells and modules from India for a period of one year. The order will take effect on July 30, 2020.

    The Ministry of Finance stated that from July 30, 2020 to January 29, 2021, a 14.9% safeguard tax will be imposed on all solar cells and modules imported from China, Thailand and Vietnam, from January 30, 2021 to July 2021. On the 29th, a 14.5% safeguard tax was levied on the above-mentioned imported goods.