In a letter submitted to India’s Ministry of New and Renewable Energy (MNRE) Minister Bhanwar Singh Bhat, the National Solar Energy Federation of India (NSEFI) provided a strong case for Covid-19 to delay projects being deployed by PV developers, And pointed out that these PV projects may face the issue of mandatory basic duty (BCD).
With less than six weeks to go before the Basic Duty (BCD) on imported PV modules (40%) and PV cells (25%) comes into effect, NSEFI has written to India’s Ministry of New and Renewable Energy (MNRE), Governance is required for the project being deployed. Through governance, these PV projects can be shielded from the new tariff structure, and perhaps replaced with a lower tariff structure.
Singh said the reasons cited by NSEFI for the delay in PV projects were based on the impact of the Covid-19 pandemic and the risk of disruption or cancellation of PV projects with a total installed capacity of 15GW being developed until March 2021 due to higher tariffs. The MNRE had previously informed of its intention to implement the Basic Tariff (BCD) to enable PV project developers to prepare in advance. In fact, the ministry has made it clear that projects tendered after March 2021 will be tendered with basic tariffs levied from April this year. This is one reason why tender prices for some PV projects have risen slightly from before the March 9, 2021 deadline.
Since many projects have not completed deployment, deployment will only continue after March 2022. NSEFI believes that even if the change in legal terms is accepted, the incremental costs it brings will place more burdens on end consumers. For these specific projects, the use of higher-cost imported PV modules also requires raising more capital, further increasing costs for PV developers.
India’s Ministry of New and Renewable Energy (MNRE) has so far been silent on the issue, even though the idea has been in the works for a long time. Another option is to push back the implementation date of the Basic Tariff (BCD), but this is out of the scope of the discussion. In fact, until 2024, India’s PV module capacity is clearly not enough to meet market demand. Especially in accordance with the increased production capacity promised by the Indian government.
Between large PV developers and domestic PV manufacturers, the Indian government clearly needs to find a balance that will please everyone. India’s Ministry of New and Renewable Energy (MNRE) does appear to be aware of the problem, as it has recently introduced measures to simplify the installation of rooftop PV and push the PMKUSUM scheme, both of which are related to domestic procurement in India. The final deciding factor may be the pricing strategy followed by domestic PV module manufacturers after the Basic Tariff (BCD) regime came into effect. Rising prices for PV modules, along with increased protection measures, are likely to raise development costs for PV developers, even as domestic PV module makers try to reduce production costs.
In either case, the rising cost of PV systems will upset the Indian government. Some restrictions are expected for certain projects related to key conditions, and even a 14.5% guarantee may be paid when these projects are bid.