Timeline for completion of solar projects bid before BCD announcement extended

In a bid to provide relief to stuck solar power projects amid module shortage, Centre has allowed the extension of the timeline for completion of projects for which bids were finalized before the announcement of the basic customs duty on modules.

In a letter to the Solar Energy Corporation of India (SECI), NTPC and NHPC, seen by Mint, the ministry of new and renewable energy said that the projects for which bids were submitted before 9 March, 2021, may be given the time for completion of project up to March 2024.

On 9 March, 2021, Centre announced that from 1 April, 2022 any import of solar PV modules would attract basic customs duty (BCD) of 40% and import of solar PV cells would attract BCD of 25%.

It noted that there are several projects for which bids were finalized by government agencies before the announcement of the customs duty, which in normal circumstances would have been completed before the imposition of the duty but got delayed to Covid and resultant supply chain disruptions.

“While a decision on bids which were finalized before the announcement of customs duty is pending, in the meantime, the extended completion dates of many projects have expired. It has therefore been decided that solar PV/solar PV-wind hybrid projects, for which bids were finalized before 9 March, 2021, may be given time for completion of project up to March, 2024,” said the letter dated 25 January.

The move is expected to come as relief for projects which were delayed and stalled due to supply chain disruptions and lack of availability of solar modules.

Arindam Ghosh, partner for power advisory at Nangia Andersen LLP said: “It is a welcome move as it had implications on 15 GW of capacity bid prior to 9th March 2021. It is needed to address the supply chain disruption and as the domestic manufacturing has not picked up after covid period. The project execution would have been delayed further if the extension had been extended, hence transmission charges and bid bonds would need to be liquidated.”

“However, the ambiguity regarding either providing change in law provisions or exempting these projects from BCD applicability remains and any additional costs incurred by developers will be borne by them directly,” he said.

Ghosh, further said that due to the extension of the applicability date, these projects will have to pay this additional custom duty if they fall under this period and the project cost will be increased.

Recently, the ministry granted an extension of timeline until September 2024 for solar power projects under the second phase of the Central Public Sector Undertaking (CPSU) programme.

The high duties were imposed in a bid to curb cheaper imports from China and boost domestic supplies. Government has also come up with production linked incentive scheme to encourage the domestic solar module industry.

However, with the domestic industry yet to pick pace and the high import duty and the Approved List of Modules and Manufacturers (ALMM) have impacted the availability of modules in the country and affected ongoing projects. The solar power industry is already reeling from a sharp rise in module prices in the last two years.

According to a report by the Institute of Energy Economics and Financial Analysis, module costs form 65% of the initial capital expenditure of a typical solar project, hinging project viability on their trajectory. Any increase in the cost of solar modules can significantly take up overall cost of the project. In an interview to Mint in September 2022, union minister for new and renewable energy RK Singh had said that the capacities impacted due to the high prices of modules and the pandemic then stood at 26 GW.

Query sent to the ministry of new and renewable energy remained unanswered till press time.