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Photo: Reuters
Photo: Reuters

Govt plans pass-through in tariffs for already bid-out solar projects

Indian customers are willing to pay more for power provided the equipment is made in India, minister Raj Kumar Singh says

NEW DELHI : The government plans to allow a pass-through in power tariffs for projects awarded before the basic customs duty (BCD) on imported solar cells, modules, and inverters is imposed from 1 August, to protect solar project developers, said two people aware of the development.

The move could lead to an increase in electricity tariffs but is being done to help developers set up these projects and maintain India’s clean energy trajectory as the government tightens its economic squeeze on China. An Indian is willing to pay more for power, provided the equipment is made in India, power and renewable energy minister Raj Kumar Singh had said earlier.

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 involves coming up with a list of approved manufacturers for government-supported schemes in the clean energy sector, including projects from where electricity distribution companies procure electricity for supply to their consumers.

A similar approved list of modules and manufacturers is being made 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, one of the two persons mentioned above, requesting anonymity.

The other measure includes prior-permission requirements for power equipment imports from countries India has a conflict with, Mint had reported earlier. The government also aims to provide viability gap funding (VGF) to domestic manufacturers to promote its Make in India initiative.

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 the other government official mentioned above requesting anonymity.

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. Ltd (REC), and the 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 mentioned above.

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