Predictably, Government Shuts Loophole For Concessional Import Of Solar Modules

In a move that many felt was widely anticipated, but where the delay on acting had given rise to hopes too, the government has finally moved to shut down the option of importing solar modules using a provision in the Project Import Regulations, 1986 that allowed complete power plants to be imported at concessional rates.

By specifically excluding solar plants from the purview of the regulations, the government has ensured that the original intent of the hike in Basic customs duties and the push for using only ALMM (Approved list of module manufacturers) for projects in India is met.

In recent weeks, ever since a ruling by the Customs Authority For Advanced Rulings in July that allowed a developer to import equipment under this route, more and more developers had made a move to follow precedence. Letters had been written to many state governments requesting approval for imports under the route, with many finding approvals too. At SaurEnergy, we are in receipt of such requests where ‘liaison agents’ hired by firms were tasked with getting requisite approvals.

The latest amendment has substituted “all power plants and transmission projects” in the law with “all power plants and transmission projects, other than solar power plants or solar power projects”, with the changes taking effect from October 20.

Reports have quoted industry insiders saying that this puts 5000 MW worth of solar projects at risk, as module prices will rise by 33% or more for most. While that figure may be correct, there is no doubt that this route was not anticipated in the government too when it imposed the new import duty structure from April 1, or even when domestic module manufacturers were pushing hard for the same.

With the largest developers increasingly going in for a hybrid sourcing model itself, by mixing market purchases with own manufacturing, the major impact of the move will play out by 2023, when we will have a better idea of how many PPAs are actually cancelled due to projects not starting, as developers find them unviable at existing equipment rates. But it seems safe to predict that the final figure will be less than the 15 GW figure that has been bandied around, with the final list of projects at real risk at anything between 4 GW to 7-8 GW, based on market inputs.