Home / News / India /  Centre extends timeline for solar projects’ completion

NEW DELHI: In a bid to provide relief to solar power projects stuck amid a shortage of modules, the Centre has extended the deadline 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, the ministry of new and renewable energy said the projects for which bids were submitted before 9 March, 2021, can now complete the project by March 2024.

On 9 March, 2021, the Centre announced that from 1 April, 2022 imported solar PV modules would attract a basic customs duty (BCD) of 40% and imported 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 due to the pandemic and resultant supply chain disruption.

“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.

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 said that due to the extension of the applicability date, these projects will have to pay the additional custom duty if they fall under this period and the project cost will increase as a result.

The high duties were imposed to curb cheap imports from China and boost domestic supplies.

The 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.

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

Rituraj Baruah
Rituraj Baruah is a senior correspondent at Mint, reporting on housing, urban affairs, small businesses and energy. He has reported on diverse sectors over the last six years including, commodities and stocks market, insolvency and real estate. He has previous stints at Cogencis Information Services, Indo-Asian News Service (IANS) and Inc42.
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