New Delhi: To help protect solar project developers, India plans to allow a pass through in power tariffs for awarded projects before the basic customs duty (BCD) on imported solar cells, modules and inverters is imposed from 1 August, said two people aware of the development.
While this may increase the electricity tariffs, it is being done to help facilitate developers setting up these projects and maintain the country’s clean energy trajectory as India tightens its economic squeeze on China.
Power and renewable energy minister Raj Kumar Singh had earlier said that an Indian is willing to pay more for power, provided the equipment is made in India.
With tensions mounting along the India-China border, India is working on a wider decoupling exercise that involves imposing tariff and non-tariff barriers to check Chinese imports. This includes enforcing a list of approved manufacturers for government-supported schemes in the clean energy sector, including projects from where distribution companies procure electricity for supply to their consumers. A similar approved list of modules and manufacturers (ALMM) is in the works for the conventional power sector as well.
“All bids placed before the application of ALMM won’t have to comply with it," said a government official cited above requesting anonymity.
The other measure includes prior-permission requirements for power equipment imports from countries with which India has a conflict, Mint reported earlier. To promote its Make in India push, the government is also looking to provide viability gap funding (VGF) to domestic manufacturers.
The imposition of BCD on imported solar cells, modules and inverters is to be followed by a plan to impose import duty on wafers and ingots that go into the manufacturing of solar cells and modules. The BCD follows the 29 July expiry of safeguard duties on solar cells and modules imported from China and Malaysia.
“Even as India is imposing a basic customs duty on imported solar cells, modules and inverters, any increase in costs due to a change in law after a bid has been placed will be a pass through. There is a formula for pass through in the bidding guidelines and all previous bids will be grandfathered," said a second government official cited above requesting anonymity.
The government plans to ‘grandfather’ such projects and is collating details along with the tentative equipment import date.
New Delhi also plans to discourage states from using Chinese equipment and technology in the strategic power sector by withholding funding to such projects from government-owned lenders—-Power Finance Corp Ltd (PFC), Rural Electrification Corp (REC) and Indian Renewable Energy Development Agency (IREDA)—if they use Chinese imports, Mint reported on 28 June.
“This will be done after the ALMM is put in place," said the first government official cited above.
These state-run firms are the largest lenders to the Indian power sector and the move is expected to deter states from involving Chinese firms, which are usually the cheapest suppliers. This will be in addition to providing low-cost funds to local power equipment makers to make them competitive.