decisions-min

Solar Safeguard Duty- Shock and Awe Tactics, Who’s The Enemy?

Our current policy makers are earning quite the reputation with their shock and awe tactics. Of course the overnight demonetization in November 2016 will go down in history books as something that de-stabilized our economy and brought life to a general stand still.

Frustratingly, our policy makers are using the same abruptness across various sectors.

Speaking specifically of the solar industry and MNRE-  take for example, various roof-top subsidy policies that were running in states such as Delhi and Punjab. Delhi’s IPGCL had empanelled vendors until 30th June 2018 plus an additional 6 months for project execution. Punjab’s PEDA’s empanellment was to be until 24th September. However, a crisp mail was received by vendors in the third week of June that empanellment would be truncated on 30th June. No consideration for the lakhs that solar companies had invested in bank guarantees for these tenders and the advances that consumers had paid for subsidized installation.

No discussion, no debate- just a half page order from MNRE.

A more recent, anticipated, policy may just be the final nail in the coffin for many in the Indian Solar industry. In the name of protecting domestic solar panel manufacturers, there are murmurs that the DG (Safeguards) may abruptly implement a 30-40% safeguard import duty on solar cells and panels. This rumor was relayed to the writer on July 11th, and implementation is expected as soon as July 25th.

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DPSI

Rooftop Solar- A Success Story at DPS International Gurgaon

Success Story is of a 100 kWp Rooftop Solar Power Plant at DPS International School, Gurgaon installed by BD Khanna Estates Pvt. Ltd.

Key Players

  • The Client: DPS International School, Gurgaon: DPS International, Gurgaon a co- educational school uses the best practices available in International Education to help students develop into well rounded, responsible individuals with a wide range of skills and ability to analyse complex issues of local, national and global significance. As an International Baccalaureate® (IB) school, DPSI offers a continuum of Primary Years Programme, Midlde Years Programme and the Diploma Programme. These programmes encourage both personal and academic achievement, challenging students to excel in their studies and in their personal development.

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gst-image-1

Accumulated ITC & Inverted Tax Structure Affecting Solar EPC

Solar Power is a source of clean, green energy and the much needed solution to solve our energy woes and fast growing energy demands of development. It is now fast becoming the cheapest source of electricity and is a solution to the electrification needs of remote villages across the country.

Further, being labour intensive, Solar PV is recognized to create more jobs per unit of energy (4 jobs per MW) than any other energy source and hence is promoted by the Indian Government as a solution to the country’s unemployment problems. Thus this industry is critical to the overall GDP growth and equitable development of India.

Indian EPC and more so Solar EPC is an aggressively competitive business with operating margins typically below 10% and net profits between 2-5% even in well managed businesses. Margins have shrunk even further as more and more entrepreneurs have entered this space in response to the Modi Government’s target to achieve 100 GW of solar PV installation by 2022.

However, the recent tax rate introductions under GST law are having an adverse impact on the roof-top solar market and Solar EPC margins in the following ways:

  • Firstly, solar plants were a zero rated product, i.e. they were VAT exempt in many states including Haryana and Rajasthan. Under GST law, a tax on 5% is applicable on roof-top solar plants. The increase in tax has not been accompanied by reduction in base price of the most expensive BOM items such as solar panels.
    • While commercial and industrial customers remain largely unaffected by the 5% tax rate, residential and institiutional customers who cannot take benefit of input tax credit are shying away from the increased net cost.

 

  • Even though tax on solar power plants is 5%, the GST on many of the BOM items is at higher slabs of 18% and 28% making it an inverted tax structure. Thus the input tax on solar components is always significantly higher than what can be offset against out put. An analysis done by Sunkalp Energy, pegs the excess accumulated input tax credit at 2- 2.5 Rs/ W- which is more than 5% of sales price.
    • Even though GST law has a provision for refund of excess accumulated credit there is no clear timeline for the same.
    • Inverted tax structure means an increase in working capital requirements for solar to the tune of 5% or more.
    • The strained cashflow position is making solar EPC increasingly unviable.

There had been positive indications earlier towards retaining solar’s zero rated position. However, there has been no notification towards that yet. In fact, MNRE had implemented Customs and Excise duty exemptions on components used for solar plants. Considering the importance of the solar EPC industry as a livelihood generator, we urge the GST council to review taxes applicable on solar power plant and their components.

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REI 2017

REI Expo Greater Noida 2017- Our Experience

This year was my 6th consecutive participation at the Renewable Energy India Expo (REI), Greater Noida- twice as an exhibitor and competitor and four times as a visitor. Over these past six years, I can certainly say that REI successfully captures the mood of the renewable energy industry. Here were my key takeaways from the expo this year:

  • Over the past years, REI has been a lot about hype, with a large proportion of only curious visitors. This year, having visited on the second day, I felt that even though the footfall was lower, but there was a larger proportion of serious business visitors. The spread in terms of number of stalls was also less than the last two years but stalls represented the serious long term players in the industry.

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