GST could hit solar capacity addition in 2018, says Mercom Capital Report
Mercom Capital Group, which tracks the Indian solar sector said in its recent report that India has already installed more solar capacity in the first six months of 2017 than in the entire 2016.
Around 4,800 MW has already been commissioned in calendar year 2017, against 4,038 MW in 2016. The report expected an addition of 10,500 MW through the year, which will be another record, almost twice the 5,525 MW added in financial year 2016-17. But 2018 is likely to be a different story because of confusion over applicability of the goods and services tax (GST) on solar products, the report warned.
“We have reduced the 2018 forecast by approximately 15% due to uncertainty surrounding GST rates, which has resulted in a slowdown in tenders and auctions. Government agencies have created an environment of chaos and uncertainty surrounding these rates. It has brought auction and PPA signing activities to a standstill as nobody wants to move forward without knowing what the GST rates are going to be,” Mercom added.
The ministry of new and renewable energy is urging the finance ministry to stick to the earlier 5% for all solar equipment, but a decision is yet to be announced. The sharp fall in solar tariffs at the last auctions held in May this year has also become a dampener, according to the report. “States are postponing tenders and auctions as they angle for the lowest possible tariff, especially after the recent winning bid of Rs 2.44 per kwH in the Bhadla Solar Park auction.
States are renegotiating power purchase agreements and want to re-tender to get closer to the lowest possible tariff.” Mercom said around 1,000 MW of tenders were cancelled in April-June. The report said the sharp fall in prices of Chinese solar cells and modules has brought down the cost of solar installation to Rs 4 crore per MW. It used to be over Rs 6 crore per MW even a year ago.