According to industry officials, at least 25 GW of solar projects face delays or uncertainties due to rising module prices or supply constraints.
Cost pressures are significant for projects with Solar Energy Corp and GUVNL bidding for aggressive tariffs in the 2020-21 auctions to win contracts. National Solar Federation of India CEO Subrahmanyam Pulipaka said the tariff impact for these projects is Rs 0.5-0.8 per unit.
“These projects should have been either commissioned or in advanced stages of construction by now,” said an industry official.
“Since the Basic Customs Duty (BCD) for these projects auctioned during 2020-21 has not passed due to the change in law, they have become impossible and may not be implemented,” the official added.
He noted that the gap between awarded projects and implemented projects is widening. India imposed 40% BCD on solar module imports and 25% on cell imports from April this year to encourage domestic manufacturing.
Solar manufacturers have made several submissions to the government over the past 4-5 months, seeking relief from higher import duties and mandatory purchase of equipment from a government-approved list of models and manufacturers for a period of two years.
They also sought exemption of previous draft proposals from the new fee structure.
A senior government official said the issues have been taken up at the Center and the demands of the solar industry are being considered.
Industry sources said only 58 GW of the 100 GW capacity targeted by 2022 under the National Solar Mission. The problem threatens additional targets of 450 GW of renewable power by 2030, including 280 GW of solar power. The country has added 10 GW of solar capacity by 2021, and needs to add about 30 GW annually to meet the target.
A nearly 40% increase in module prices due to strong post-Covid demand, polysilicon supply bottlenecks and unprecedented increases in ocean freight rates and prices of commodities such as copper, silver, aluminum and steel have pushed up the cost.
The depreciation of the rupee by nearly 7% this year and the increased GST levy have further increased the project costs.
The Indian solar market is heavily dependent on imports as more than 90% of equipment is sourced from Chinese suppliers. The government has announced a Manufacturing Linked Incentive scheme to encourage local manufacturing.
“As modules typically account for 60-70% of the cost of an entire solar project, this increase in prices has exposed many renewable projects to large losses and non-renewable projects,” said the official.
Imported solar modules now cost about 40 cents per watt, compared to 27-28 cents for imported modules 18 months ago, while domestic solar modules cost 37 cents per watt.