New Delhi: The government has extended the commissioning for solar projects under Tranche I, II and III of the Central Public Sector Undertaking (CPSU) programme Phase-II to 30 months from the existing 24 months from the date of letter of award (LoA), the Ministry of New and Renewable Energy (MNRE) said on Friday. "Further, the timeline for the intermediate milestone of "Award of EPC Contract', which was 6 (six) months from LoA, in Tranche-I & Tranche-II, has also been increased to 12 (twelve) months from the date of LoA," the ministry added.
The extensions in project timelines comes in the wake of requests received from industry leaders on account of temporary shortage of gear for solar PV power projects, particularly domestically manufactured solar PV cells, said the ministry. "The interactions of the Ministry with industry stakeholders have also indicated that the addition of new domestic manufacturing capacity of solar cells has been delayed due to COVID-19 related travel restrictions," said the MNRE.
The government has also asked SECI to submit a compliance report on the same within 14 days.
India imports around 80 percent of the solar cells and modules required within the country from China. In the wake of an escalation in border disputes and confrontations with China, the government had decided to tighten the noose around Chinese imports as part of an economic response. And therefore, the Centre placed increased impetus on building domestic manufacturing capacity so that the country's dependence on cheap Chinese imports is reduced. In the Budget 2021-22, Finance Minister Nirmala Sitharaman proposed to increase import duty on solar inverters and lanterns from the current 5 percent to 20 percent and 15 percent, respectively. In addition to an increase in import duty, exemption to all items of machinery, instruments, appliances, components or auxiliary equipment for setting up of solar power generation projects was also rescinded.
The government has also decided to impose a steep 40 percent Basic Customs Duty (BCD) on solar modules and 25 percent on solar cells from April 1, 2022 in order to make imports costlier and give a fillip to domestic manufacturing. A crisis of sorts has emerged because of this situation as the increased import duties only take affect in 2022. In the meanwhile, the one-year extension on safeguard duty on import of solar cells and modules announced by the government in July 2020 is set to expire on July 29 this year. Therefore, in the nine-month period between July 29 this year and April 1, 2022, there will be no duty barrier on import of solar modules but duties on import of raw materials will exist. This will make manufacturing of solar gear in India unsustainable for some time at least. The concern was also highlighted in a recent statement released by CMD Hitesh Doshi of Waaree Group, one of India's solar module manufacturers.
Since the imposition of duties come at a time when domestic manufacturing of solar gear in India is yet to come of age, there is bound to be a shortage of solar PV equipment for renewable power project developers. India currently has around 15 GW of solar manufacturing capacity.