New Delhi: The recent proposal by the Directorate General of Trade Remedies (DGTR) under the commerce ministry to impose 25 per cent safeguard duty on solar cells, if implemented, is likely to jack up retail tariffs by about 30-35 paise per unit, according to research and ratings agency ICRA.

The imposition of safeguard duty at 25 per cent, if approved by the ministry of power, would increase the capital cost for a solar power project by 15 per cent and, in turn, the tariff must be increased by about 30-35 paise per unit to maintain a similar level of returns for the project developers.

“For existing domestic solar cell and module manufacturers, the imposition of safeguard duty would be a positive development as it would lead to an improvement in their competitiveness against the cheaper imports," said Sabysachi Majumdar, Group Head- Corporate ratings, ICRA Ltd.

He added that as the safeguard duty is applicable only for a period of two years, it is unlikely to lead to any significant increase in the domestic solar module or cell manufacturing capacity.

The amendment to bidding norms approved in April 2018 allowing pass-through of changes in taxation, duties and cess would allow the developers to pass through the tariff increase to the off-takers. In this context, the timely approval by the regulators and pass-through of the tariff increase to the off-takers is critical from their cash flow perspective, ICRA said in a statement. 

The DGTR has recommended imposition of a 25 per cent safeguard duty on solar cells (assembled into modules or not) imported into India from China and Malaysia in the first year, followed by a gradual reduction to 20 per cent in the first six months of second year and further to 15 per cent in the latter half of second year. 

This is lower than the 70 per cent recommended earlier by Directorate General of Safeguards in January 2018, with a view to balance the interests of the domestic manufacturers as well as the solar power developers and consumers.