Power Minister Requests To Grandfather Solar Projects Tendered Before March 9, 2021

The complex issue of safeguarding projects that were tendered out before March 9, 2021, following which Power and MNRE Minister R.K. Singh revealed plans to levy hefty basic customs duties (BCD) on Solar modules and cell imports, appears to have moved a step closer to settlement.

Mr Singh said that the MNRE ministry has written to the Ministry of Finance to request that these projects be exempted from the higher tariff regime, which is slated to take effect on April 1, 2022.

The topic of ‘grandfathering,’ or exempting older projects from the new rule, has always been on the table, but the customary last-minute efforts suggest that the administration wishes to prevent too much debate.

This is because domestic producers for whose growth and advancement the new duty regime has been suggested, are unlikely to welcome the move, blaming large developers for stocking up during the zero duty rule that has lived since the safeguard duty was phased out in July of this year

According to the National Solar Energy Federation of India, the projects at danger total around 28 GW, a far greater amount than previously reported, owing to delays caused by pandemic-related shutdowns and other factors. 

The federation further said that the new BCD regime of 40% tax on solar module imports and 25% duty on cell imports will need to be regarded as a ‘Change in Law’ event for all of these projects, and authority to raise end pricing will need to be escalated correspondingly. 

This risks making many of these projects unappealing to purchasers, as well as introducing a slew of additional legal difficulties around calculating methods and other issues.

Even stockpiling allegations connected to big developers should not be considered legitimate, as module prices have risen over the last year as a result of raw material shortages and logistics problems in China caused by Covid shutdowns, removing a considerable part of the gain from the previous zero-duty system.

With India’s domestic capacity set to double by 2023, and further development, the concern and arguments of availability appear to be a short-term challenging issue, and grandfathering may still be the only effective way out, even if it only meets manufacturer requirements partway. The third alternative, postponing the implementation of the new tariff system, has already been abandoned.