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Safeguard Duty reimbursement yet to be disbursed

Developers are in limbo, awaiting final order for compensation under “Change in Law” clause. To protect domestic cell and module manufacturers, a 25% safeguard duty was announced on solar cell and module imports from China and Malaysia for the period between July 30, 2018, and July 29, 2019. The duty was set at 25% for the first year, followed by a phased down approach for the second year, with the rate reduced by 5% every six months until the duty is set to end after July 2020.

Projects that were under development during announcement of safeguard duty were included into "Change in Law" clause ie. the solar projects that were auctioned before the imposition of the safeguard duty are eligible to get compensated for increased project costs as a result of the duty. Yet solar developers have been struggling to get the reimbursement for their safeguard duty. This has adversely affected their business and the pace of solar project development in the country.

Delay in disbursement of safeguard duty has strained business operation as it created a huge financial burden on solar developers. Lenders in the market are reluctant to fill the gap even after regulators have accepted safeguard duty. Developers are concerned of disbursal, as this constraint has displaced debt-equity ratio from an initial 75:25 to 65:35, to a 70% hike from the initial equity exposure to the developers.

To get the development in solar sector going ie. creating more investments, more jobs, government must ensure timely payments, so developers have enough cash for their operational activities and pinning to new projects..