Safeguard duty imposed by the government on imported solar cells is likely to push up solar bid tariffs and may not increase domestic manufacturing capacity of these items in the near term, credit rating firm Icra said today.
Following the recommendations of the Directorate General of Trade Remedies (DGTR), the finance ministry issued a notification yesterday, imposing 25 per cent safeguard duty on solar cells (assembled into modules or not) imported from China and Malaysia.
Sabyasachi Majumdar, Group Head - Corporate ratings, Icra, said: "The imposition of safeguard duty is likely to increase the bid tariffs to Rs 2.9-3.1 per unit for the upcoming bids. For the project already bid out, the amendment to bidding norms approved in April 2018 allowing pass-through of changes in taxation, duties and cess would allow the developers to pass through the tariff increase to the off-takers.
"However, the timely approval by the regulators and pass-through of the tariff increase to the off-takers is critical from the cash flow perspective of the project developers."
In a separate statement, Rahul Prithiani, Director, Crisil Research, on the Solar Safeguard Duty said: "An increase in capital costs means solar becomes less competitive as compared to wind power, which averaged Rs 2.80 per unit in fiscal 2018 and has also seen tariffs as low as Rs 2.43 per unit."