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Capping solar power tariffs could hurt projects viability

Ministry of New and Renewable Energy is contemplating capping the tariff on solar power generated using imported cells and modules at Rs 2.68 per kWh, which includes the safeguard duty amount of Rs 0.30-0.35 per kWh. This tariff is lower than what bidders have quoted in the recent past. if the ministry decides to go ahead with this capping, it may lead to non-participation by a significant number of potential bidders in future auctions which may negatively affect MNRE’s yearly 30 Gigawatt capacity addition plan until 2020. The domestic solar power industry is already grappling with confusion over applicable safeguard duty, increased project cost due to the depreciating Indian Rupee against the US Dollar and a lower margin of safety due to highly competitive tariffs.

Any cap on solar power tariffs imposed in future auctions could dampen free-market sentiment, negatively impact the viability of projects and prove to be an Achilles heel for the government’s plan to achieve the solar power capacity target of 100 Gigawatt (GW) by 2022.