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Government should offer incentive to help India achieve solar power target by 2022: LSI
Sebi approved merchant banker LSI Financial Services feels Indian government should contemplate offering financial stimulus including price incentives and subsidised credit to domestic solar cell and module manufacturers.
The incentives will not only make the country’s module manufacturers globally competitive but also help India achieve its ambitious National Solar Mission target to add 100 gigawatt (GW) of solar power capacity by 2022, the merchant banker's research arm said in a report. India is the world’s third-largest energy consumer after the US and China with the current solar power capacity at about 24GW.
Ratings agency Crisil had, in its last report, said India will not be able to achieve its ambitious target of generating 100GW solar power by 2022. In its report, Crisil’s industry research arm said that in the best-case scenario, the country will touch 78-80 GW, against the current capacity of 21.65 GW. Crisil expects an additional 56-58GW of solar capacity addition between fiscals 2019 and 2023. While this is a vast improvement from the 20GW added during 2014-18, it still falls short of the National Solar Mission target by a fifth.
Institutional and regulatory bottlenecks like imposition of safeguard duty on solar modules from China and Malaysia, which took effect this month and will continue for two years, is expected to slow capacity addition, the report stated.
Elaborating further, the report said uncertainty regarding the safeguard duty is making developers wary about project viability as imposition of duties will increase the price of imported solar modules compelling manufacturers to either downsize or exit from the market. Investors and banker confidence will also suffer a setback and quite a few solar projects may get scrapped, the report added.
The government, on July 30, ordered safeguard duty of 25 per cent on solar panels and modules imported from China and Malaysia to protect domestic manufacturers and to encourage solar project developers to buy units locally. However, faced with mounting pressure from solar power developers, the duty has been temporarily lifted. About 90 per cent of the solar cells and modules used in India are imported from China and Malaysia, according to industry estimates.
Industry experts believe that the safeguard duty will raise capital costs by 15-20 per cent. Solar power tariffs in India plunged to a record low of Rs 2.44 per unit in July due to decline in module prices and improvements in capacity utilisation. The declining tariffs have attracted good investments but have raised concerns over the long term sustainability of the projects.