‘GST may Hit Solar Capacity Addition in 2018’
New Delhi: India has already installed more solar capacity in the first six months of 2017 than in the entire 2016, according to a report by Mercom Capital Group, which tracks the Indian solar sector. Around 4,800 MW has already been commissioned in calendar year 2017, against 4,038 MW in 2016. The report expected an addition of 10,500 MW through the year, which will be another record, almost twice the 5,525 MW added in financial year 2016-17. But 2018 is likely to be a different story because of confusion over applicability of the goods and services tax (GST) on solar products, the report warned. “We have reduced the 2018 forecast by approximately 15% due to uncertainty surrounding GST rates, which has resulted in a slowdown in tenders and auctions.”
Initially, the government had maintained that all solar components would invite 5% GST, as reported by ET in its July 4 edition. Later, however, it clarified that only solar modules would be taxed at 5%; the other components would face18% or 28%. “Government agencies have created an environment of chaos and uncertainty surrounding these rates. It has brought auction and PPA signing activities to a standstill as nobody wants to move forward without knowing what the GST rates are going to be,” Mercom added. The ministry of new and renewable energy is urging the finance ministry to stick to the earlier 5% for all solar equipment, but a decision has yet to be announced.
The sharp fall in solar tariffs at the last auctions held in May this year has also become a dampener, according to the report. “States are postponing tenders and auctions as they angle for the lowest possible tariff, especially after the recent winning bid of ₹ 2.44 per kwH in the Bhadla Solar Park auction. States are renegotiating power purchase agreements and want to retender to get closer to the lowest possible tariff.” Mercom said around 1,000 MW of tenders were cancelled in April-June.
The report said the sharp fall in prices of Chinese solar cells and modules has brought down the cost of solar installation to ₹ 4 crore per MW.