Anmol Singh Jaggi, Director, Gensol Group
What is the current EPC scenario in India?
The Indian solar industry had close to 9 GW of engineering, procurement and construction (EPC) work in 2017, and we are expecting a sharp dip in 2018. In my opinion, we will not be crossing over 7 GW of EPC work this year and this will continue until mid-2019. Here, the major influencer will be the looming custom duty expected at 7.5 per cent and safeguard duty at 70 per cent. Goods and Services Tax (GST) did not have a huge impact at 2-3 per cent as that was affordable. However, these combined could finish the industry.
What are the main reasons for the dip?
The first reason is that between August-December 2017, there were hardly any tenders that came out in the market. Also, for those tenders that did come, it takes about six-seven months for the EPC job to start. Secondly, there are now the issues of custom duty and safeguard duty, which can affect project costs. The moment price of the projects go up while the viability of the projects go down, and, this
is where some of the projects that have already been awarded may also be stalled.
How do you see the EPC segment shaping up?
Today, if you consider solar, it is the cheapest form of energy. But, if the 70-per cent safeguard duty is implemented, it will finish viability for the sector. We are keeping our fingers crossed that this is not implemented.
To summarise, 2018 is going to be a tough year for every EPC player, big or small. The market exploded and a lot of people enjoyed. But, not every year will see a rise, and we will have to undertake expense control to tide over.
Among the states, Uttar Pradesh, Haryana, Karnataka, Tamil Nadu and Rajasthan are the few that will do very well. In fact, out of the estimated 7 GW, Uttar Pradesh, Karnataka, Tamil Nadu and Rajasthan will have around 4- to 5-GW share.
How much of the 7 GW is Gensol targeting?
Today, we have almost 47 per cent market share. So, I am hoping
that due to our customer connect and services, we should be able to expand our market. In operations and maintenance (O&M), we have close to 16-17 per cent market share due to our good customer service and pricing, and we hope to take this up to 35 per cent.
What kind of consolidation do you see happening, given the slow down in tenders and impending taxes?
A lot of consolidation is already happening. Players like Ostro & Orange Renewables are being bought by ReNew Power Energy and Hero Future Energies, respectively. Besides these, there are also many small deals happening in the 60-100 MW space. So, there is definitely consolidation.
If you look at the EPC contractors end, new ones will emerge in a moving sector. Hence, today there'll be 1,500 EPC contractors, but if there is a slump of six months to one year, you will see this number reduce to 550 contractors. Thus, those on the weaker end of the market shut shop once there is a downturn. We already see many such small players shutting shop and if this kind of duty is implemented, there will be a very high number of contractors out of business. Thus, this will end up impacting not only those who are not serious about the business, but genuine small players as well who have limited capital.
In fact, I am expecting 2018 to be a bad year for everybody across the board v thermal and renewable segments. India is currently in a power surplus mode and policymakers do not want more power generated in the system, This is because power plants are operating at 50-55 per cent plant load factor (PLF). In the second half of the year, politics will begin because elections are due in early-2019. Thus, 2018 till mid 2019 will see tight times for everyone.
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