‘GST may Hit So­lar Ca­pac­ity Ad­di­tion in 2018’

The Economic Times - - Companies: Pursuit Of Profit - Kaavya.Chan­drasekaran @times­group.com

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.

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