In a notification released by the Industries, Labour and Energy Department, a tax of INR 1.2/ unit would be levied as Electricity Duty for units produced by Solar for self-use.
The release very clearly clarifies the ED that would be levied on electricity produced from Solar (in our case, produced and consumed at source) which amounts to INR 1.2 per unit. This has so far been a grey area which has now been clarified by the Government (refer). Levying this tax does not seem to benefit any of those consuming the electricity. As a matter fact, now ED will be charged on installing Solar which was not the case before since it was a grey area. Refer to the tables below for more details:
Table A depicted above, prescribed ED within the limits provided by the Maharashtra Electricity Duty Act, 2016. Table B below shows the Electricity Duty that will be leviable on electricity produced from Renewable Sources of Energy.
Electricity Duty on Renewable Energy
Now let’s apply the per unit charge for a case in Maharashtra. The energy consumption charges for Residential consumers for Maharashtra is INR 13.63 (refer) for the highest slab on which 16% is levied as electricity duty. This equates to an addition of INR 2.18, increasing the tariff to INR 15.81/unit. However, for those who consume below 300 units, the maximum ED payable is INR 1.2/unit. However, those who consume below 300 units, will not perhaps invest in a Rooftop Solar System since the ED they have to pay by installing solar would more than they would have to pay without installing it. Thereby making solar installation a bad proposition. However, most of the urban population would have a consumption of more than 300 units, so perhaps only a small portion of the urban and large portion of rural population would not be incentivised to install solar.
The above table specifies that the duty for sale of power would be the same as it is for consumption of grid electricity. This would be mean passing on the cost to the consumer and hence, either an increase in tariff for consumers, or an increase of pressure on Investors and EPC. This move is in contrast to the move that was made by Rajasthan (refer), which exempts all Solar Projects from any kind of Electricity Duty (refer). Such a move in any other state would not have made any sense, however, since the electricity tariffs are already so high in Maharashtra, this move may not make much difference to open access consumers (since the overall buying tariff will continue to be lesser than grid tariff), while also keeping the DISCOMs happy.