India may impose basic tariffs on imported components from August 1st

(PV-Tech News) Recently, ICRA Group said that whether the tariff of 2.36 Indian rupees per unit is feasible, the key depends on the price of solar modules and the proposed transfer of import tariffs.

Solar Energy Corporation of India (SECI) recently concluded the ninth batch of interstate transmission system solar project auctions, which resulted in a record low electricity price of 2.36 rupees/unit, which was significantly lower than the price of 2.44 rupees/unit in May 2017. A new statement by ICRA stated that the sluggish demand caused by the new crown epidemic and the decline in global solar module prices are driving down electricity prices.

In addition, there are other factors that affect the feasibility of solar power prices. These factors depend on the price level of solar modules and the exchange rate of Indian rupee to US dollar, in addition to cost-competitive long-term debt interest rates.

Sabyasachi Majumdar, ICRA Group Director and Senior Vice President, said: "In addition, considering that India may soon adopt trade restrictions related to China, which will affect the price competitiveness of components. Therefore, the feasibility is still crucial. In addition, due to Basic tariffs are imposed on imported components, and project costs have increased. It is also extremely important to pass on these project costs in a timely manner. However, notification of such tariffs is not yet in place."

At present, India's safeguard tax on imported components is 15%. This safeguard tax will expire in July 2020. The Indian government may impose basic tariffs from August 1, 2020.

The Indian solar industry relies mainly on sourcing solar modules from China. However, in the context of increasing geopolitical risks between China and India, the procurement of solar modules for solar projects under construction and the procurement of raw materials for domestic solar module foundries may pose challenges, especially the procurement of solar raw materials from China.

Girishkumar Kadam, head and vice president of ICRA, said: "In this case, the cost of importing such components/components from other destinations, including the cost of purchasing from domestic component manufacturers, is still feasible for solar projects under construction in the short to medium term. Critical monitoring indicators."

According to the detailed description of the document, the component price based on the capital cost assumption is 0.20 rupees/watt, the factory load rate base assumption (DC) is 17.5%, and the AC:DC ratio is 1:4. Assuming that the applicable tariffs can be passed on in time, the bidding electricity price of the project is 2.36 rupees/kWh, and the debt coverage index during the 18-year debt repayment period is expected to be 1.25 times.

In addition, in addition to the risk of changes in the factory load rate caused by climate conditions, the debt coverage index is still affected by the exchange rate of the Indian rupee against the US dollar (referring to imported components) and changes in interest rates.