Is MNRE overreacting by putting a limit on the solar power tariffs?
The MNRE has decided to cap the maximum solar power tariff at INR 2.5 and INR 2.68 per unit for developers using indigenous and imported solar cells and panels. India has witnessed a solar tariff as low as INR 2.44 per unit. The safeguard duty imposition of 25% for the first year, is expected to increase capital costs by 15-20%, and raise bid tariffs by another 30-40 paise per unit. According to industry estimates, prices of a solar system are poised to increase to more than INR 3 per unit from prevailing INR 2.5 per unit levels today, after duty imposition. The price of rooftop solar is further expected to increase to nearly INR 4 per unit.
The government capping the upper limit is no good news for developers who will no longer be free to increase their bottom lines. The proposed tariffs are also lower than that achieved through the reverse bidding process conducted by various states and SECI. The ministry has further said that tariffs would be further reduced by INR 0.18 per unit if found that bidders have not paid safeguard duty on imports. They further reiterated that SECI’s future bids should be in lot sizes of 1,200 MW, with no maximum limit, and the minimum bid should be for 50MW.
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However, with reverse auction bidding the solar tariffs are already very competitive in India. It is hard to say whether prices are unreasonable in India. Remember India has witnessed one of the lowest solar bid tariffs in the world.
Rahul Prithiani, director of Crisil Research, said “the government must live with the outcome of the auction process; it should go ahead with these projects even if tariffs are higher than what they like. It’s hard to say which tariff is unreasonable; it’s hard to predict whether module prices will go up or down in the future. If bids are scrapped, you’ll further delay the overall programme.”
Source: Mint
Let’s wait and see industry’s reaction on this news. The solar industry has gathered a lot of attention in recent times with the proposed safeguard duty. Now, this new rule on tariff limitation is definitely going to raise more eyebrows. India has one of the most aggressive solar targets to be achieved over the next four years and needs to formulate policies and regulations keeping that in mind. The developers are already not so happy with safeguard duty imposition and now a limit on solar bids will further dissuade them. India needs to keep adding on new installations to achieve its target and reduce its carbon footprint.
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