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Clouds gather over India solar energy sector
Spectacular growth slows as developers worry about higher taxes and tariffs
The Shakti Sthala solar energy complex near Bangalore was inaugurated on March 1, but many other projects have been shelved or scrapped © AFP
Kiran Stacey in New Delhi yesterday
7
Narendra Modi on Sunday hosted India’s biggest diplomatic summit in years as he launched a new international body to help finance solar projects and seeks to cement India’s place at the forefront of the global energy revolution.
But even as the Indian prime minister welcomes more than 20 world leaders to New Delhi for the International Solar Alliance conference — designed to help fund solar projects in some of the world’s sunniest and poorest countries — evidence is building that the spectacular growth in the Indian solar market is grinding to a halt.
Experts attribute much of the slowdown to developers worrying about higher taxes being levied by Mr Modi’s government.
Last year, the Indian solar industry was celebrating the fact that a company had bid a record low of just Rs2.44 ($0.04) for every unit of electricity it eventually produces from a solar farm in the northern state of Rajasthan.
But since then, solar companies have been hit by several tax increases.
From last July, developers have had to pay 5 per cent under the new goods and services tax on solar equipment, while some ports are charging an additional 7.5 per cent import duty on panels from abroad.
Regulators are now proposing an “emergency” 70 per cent tariff on solar parts made in China, Malaysia and the west, in a bid to protect the few Indian panel manufacturers. The move follows similar actions by the US and EU.
As a result, many tenders for new projects are either on hold or have been scrapped.
Last July, the Solar Energy Corporation of India abandoned tenders for 950 megawatts of capacity, deciding instead to delay in the hope of getting even lower tariffs in future. The same thing happened with 200MW of solar capacity in the central state of Madhya Pradesh.
This financial year, say industry executives, tenders for more than 3 gigawatts of capacity have been cancelled. Others have been signed, but are still waiting for contracts to be finalised nearly two years later.
Gyanesh Chaudhary, chief executive of Vikram Solar, said: “There is a lot of uncertainty over taxes and duties . . . making developers reluctant to bid for the projects.
“Developers are caught up in a difficult financial position and they have become vulnerable to risk . . . which is eventually leading to the cancellation or postponement of the tenders.”
Arunabha Ghosh, chief executive of the Council on Energy, Environment and Water, said: “Developers have been squeezing every penny to try and capture market share, but many still don’t know if their projects are going to get final agreement or not.”
Indian officials hope that these problems in their own solar market will not dull the shine from Sunday’s high-profile launch of the ISA, which many believe will provide a tangible boost to solar markets in many tropical countries.
The organisation, to which 58 countries have signed up, will help aggregate different solar projects into larger tenders, allowing developers to benefit from economies of scale. It will also create an industry-funded insurance scheme to encourage banks to lend to what they might otherwise see as overly risky projects.
Upendra Tripathy, the director-general of the ISA, said: “Banks still hesitate about making solar investments because despite all its recent progress, the technology is still a little new.”
Asked about the threat of higher taxes on Chinese solar panels, he added: “In many countries, the price of solar is already as cheap or cheaper than fossil fuels. Higher taxes are not going to reverse that.”
Copyright The Financial Times Limited 2018. All rights reserved.
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