Customs duty change: First auction fetches solar bid tariff of Rs 2.20 per unit
The first solar auction after the announcement of the basic customs duty on solar imports fetched a tariff of Rs. 2.20, much to the surprise of the renewable energy industry.
Currently, the lowest tariff discovered in the country is Rs. 1.99 per unit, which was also held by the Gujarat Urja Vikas Nigam Limited (GUVNL). Most industry players and agencies such as ICRA had anticipated a rise of around 25% from that benchmark, which would result in a hike of at least 45 to 50 paise per unit.
A couple of weeks ago, the Centre announced the imposition of a basic customs duty (BCD) on solar imports from April 1, 2022. A 40% charge will be imposed on solar modules, while cells will attract 25%. Already bid-out projects will not be exempted, the Ministry of New and Renewable Energy (MNRE) notification clarified.
Out of the total 500 MW from the GUVNL-hosted auction, NTPC Renewable Energy won 150 MW, Actis-backed Sprng Ujjvala Energy won 120 MW, Coal India received 100 MW, while Tata Power arm TP Saurya was allocated 60 MW, all at Rs. 2.20. SJVN Limited won a further 100 MW at Rs. 2.21 per unit.
“We were expecting a natural market correction from the record low [of Rs. 1.99], and then some hike of around 40 paise to take into account the BCD. It’s quite surprising that we’re seeing Rs. 2.2, which is a huge boost for the industry as a whole for future auctions,” said an executive from a renewable energy developer requesting anonymity.
Other companies who fell short in this auction were ReNew Power, Saudi-backed Aljomaih Energy, Ayana Renewable Energy and Juniper Green Energy.
In February, GUVNL had unilaterally pulled out of a 700 MW project at Dholera, citing high tariffs that would put a financial strain on both the distribution company as well as consumers after discovering the Rs. 1.99 tariff. Investors worldwide had grown weary of the Indian renewable sector, which continues to remain plagued by contract reneges and non-payment of dues by state-owned electricity distribution companies.