Solar energy sector: A developers’ perspective

India has been charging ahead in the fast-growing solar energy sector. The United Nations recently conferred the “Champions of the Earth Award” to Prime Minister Narendra Modi in recognition of India’s work in promoting new areas of cooperation on environmental action and championing the International Solar Alliance (ISA).

ISA is a platform for cooperation among solar resource rich countries to reduce the cost of finance and technology, and for mobilizing more than US$1 trillion of investments by 2030.

However, despite the government’s focus on developing the solar energy sector, India’s regulatory and legal framework leaves a lot to be desired. Instead of supporting the solar power developers, it appears to be disincentivizing them.

Imposition of safeguard duty: The Ministry of Finance in a notification on 30 July, imposed a safeguard duty, a duty payable on import of goods that are already being manufactured in India, on “solar cells whether assembled in modules or panels” for a period of two years.

While it helps to protect the interests of the domestic module manufacturers, it dissuades developers from continuing with their projects under implementation as the additional duty increases the cost because most Indian solar power companies import their modules mainly from China and Malaysia.

Solar projects that have the tied-up power purchase agreements with a fixed tariff, determined keeping in mind the costs of the (imported) solar modules, will now become unviable because of the additional safeguard duty. It is important that the government step in and take corrective measures to protect the interests of the solar power developers at least for the projects that are under implementation.

Deepak Kumar Thakur is a partner at HSA Advocates. HSA is a full service firm with offices in New Delhi, Mumbai, Bengaluru and Kolkata.