Confusion regarding GST rate on solar and safeguard duty on SEZ-based manufacturing units are not allowing the domestic manufacturing industry to grow, feels Ivan Saha, BU Head- Solar Manufacturing and CTO, Vikram Solar.
How has the Make in India programme helped the solar sector? What products do we expect to see at REI Expo 2018?
Prime Minister Narendra Modi took a decisive action launching the Make in India campaign. The initiative was expected to bring more investment, job opportunities and a platform for technology upgradation in the promising industries, namely the solar industry.
Although, the Indian solar industry has leaped from 5 GW in 2015 to 13 GW in 2017 and current capacity of 21 GW, showing government support; the core idea of Make in India which is to transform India into a manufacturing hub is yet to become a reality.
The issue of solar module import has grown every year presenting a bill of USD 3.8 billion in FY 17-18. Confusion regarding GST rate on solar (module is under 5 per cent tax, but other equipment are attracting 12-18 per cent tax) and safeguard duty on SEZ-based manufacturing units are not allowing the domestic manufacturing industry to grow. We must also highlight that China's recent plan to restrain its renewable energy targets will lead to a further fall in imported module prices, with a capturing demand of domestic manufacturing even more (already foreign solar suppliers account for 80 per cent share in India).
India's dependency towards imported modules is completely the opposite of Make in India vision and it damages India's chance of gaining solar energy reliance.
To be truly successful, the Make in India venture has to be more focused on solar domestic manufacturing as it can become a considerable job creator and bring socio-economic growth, which is what Make in India's true purpose is.
SolivoTigo 72 cell modules
Somera half cut 72x2 cell
Somera bifacial 72 cell
Floating solar solution
What are the upcoming opportunities for the RE sector in India?
Infrastructural development, rooftop solar, new projects and export opportunities in India have started growing at the end of 2017, and policy support had given a conducive environment for green energy progress.
Solar parks in India have recorded 103 per cent year-on-year growth by generating 8.54 billion kWh of electricity in the first quarter of 2018. And, as compared to the Q4 2017, the solar production in India was 31 per cent higher in Q1 2018. Several large-scale solar parks started being commissioned in the first quarter of 2018, boosting solar generation capacity in India.
The Ministry of New and Renewable Energy (MNRE) has plans to award 77 GW of solar power projects by 2020. Also, plans for 5-10 GW of floating solar power projects auctioning in 2018 are on the table.
Also with the International Solar Alliance, technology and strategy exchange can be possible within India, furthering the solar market growth.
However, confusion surrounding safeguard duty on modules manufactured in SEZ and GST, and lack of protection against the incoming solar module oversupply issue due to China's new energy policy are limiting the solar growth in India.
How has GST affected the renewable energy sector? What are the challenges faced by the solar sector at the moment?
GST is undoubtedly one of the bold reformations that promised to change the Indian economic landscape for good. It has led to the standardisation of indirect tax laws, thus making them business friendly and intelligible for investors.
Before GST implementation, the solar industry enjoyed NIL excise duty, NIL sales tax in most of the states and NIL basic customs duty. There is ambiguity on GST rate. If solar modules are charged 5 per cent GST, there is an issue of cash flow blockage. And at 18 per cent GST, developers are showing hesitance in shouldering of projects.
MNRE has issued a clarification stating that all the equipment used in deploying solar power projects including work contracts should be classified under 5 per cent tax bracket.
Unless there is a gazette notification from the Ministry of Finance or GST Council stating that all the equipment used in deploying solar power projects including work contracts should be classified under 5 per cent tax bracket, ambiguity will prevail in the sector and continue to add to the expense of solar project development, which is not favourable for a nascent industry.
What are the positive impacts of government policies on RE industry?
Policies like Electricity Act, 2003, Jawaharlal Nehru National Solar Mission, Ultra Mega Power Projects (UMPPs), National Tariff Policy (2016), Power to the people, Ujwal Discoms Assurance Yojana (UDAY), Rent a roof policy, boost to manufacturing, no environment clearance required for solar projects, Green Energy Corridor Project, etc., have created a favourable environment for the growth of solar industry, while bringing in foreign investment.
The latest hybrid policy is a progressive policy as it can potentially boost the deployment of the solar-wind hybrid power plants and help India achieve grid stability. At this point, India needs to focus on increasing its solar adoption rate. And combining solar and wind is a great way to do that. However, the full extension of the benefits that this policy will bring forth is yet to be seen. Also, we need to highlight that the policy does not provide a framework for converting existing wind or solar plants into hybrid plants which is necessary.
Do you think the country has benefited at larger from the RE sector and how?
Renewable energy growth (especially solar) promises to reach electricity to the furthest corners of India, bring investment within the country, create jobs, facilitate industrial growth, enhance manufacturing capacity, increase export volumes and introduce socio-economic growth within India. And if we look at the current growth, we will see that solar has powered each of the columns that are shouldering India's growth.
How do you think RECs, net metering incentives and assured Power Purchase Agreements are going to impact the solar companies?
Renewable Energy Certificate (RECs), net metering incentives and assured Power Purchase Agreements will surely help in the solar growth and increase the rate of green energy adoption. With a higher rate of energy adoption, demand for solar will grow, thus giving solar manufacturers a chance to contribute to the solar revolution. However, the government should focus on creating compliance cells to make sure that policies are enforced in order to see expected results.
Does Hybrid Energy Policy make sense for India? If yes, why and what are the implementation challenges?
Hybrid plants will serve a dual purpose. They will help India to increase its share of renewable energy in its energy mix as well as aid in achieving grid stability because it will reduce the intermittent power injection into the grid. Also, it will lead to the optimal use of land and other resources which will eventually make them cost competitive.
Currently, there are a few hybrid plants in the country but only at a small scale. Only with sufficient fiscal incentives and favourable regulatory measures can this policy help hybrid plants to take off in a significant manner.
- Rahul Kamat
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