Sent: 27 March 2018 11:54
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Subject: TIME TO PROTECT THE ENTIRE ECONOMY
This was
Expected !
-----------------------
Economic Times ( 21 March ) carries following news :
Maharashtra’s latest
1,000 MW solar auction received bids of only 530 MW and thus had to be postponed for the fourth
time
Similarly, Karnataka’s
1,200 MW auction for projects at the Pavagada Solar Park drew bids of only 550 MW at the second
effort
REASON ?
With over 90% of solar
equipment being imported, solar developers have become cautious ever since the
Directorate of Safeguard Duty, reacting to a complaint from local solar
manufacturers, proposed imposing 70% safeguard duty on imported solar panels in January this year on the grounds that such
imports were crippling local industry
To get a clear picture of the
current “ Solar Stalemate “ , let
us turn to the following news :
Arguments advanced by Solar Manufacturers Association ( ISMA ) for levying 70 % Safeguard Duty ,
are as follows :
At current prices and import trends, it will result in net foreign
exchange outflow of Rs. 2.44 lakh crore, or approximately $45 billion. India
currently has the third largest solar installations in the world after China
and the US.
The US and the EU
have imposed duties on import of cells and modules from China. Consequently,
China’s solar gear exports to the US and EU have declined from 31.87 per cent
in 2014 to 4.74 per cent in 2017.
At the same time,
China’s exports to India have grown exponentially, from 2.92 per cent in 2014
to 32.32 per cent in 2017. Chinese companies tend to bring down prices
significantly and push out the local manufacturers, according to ISMA.
India’s solar programme
is currently China-centric, accounting for nearly 90 per cent of market share
directly or indirectly through their off-shore companies.
This news report goes on to add :
Safeguard duty on
imports from China will result in immediate investments in manufacturing
capacities in India. The industry estimates that in 18 to 24 months, India will
have an integrated solar manufacturing ecosystem with an annual capacity of 15
GW. This will result in 250,000 new jobs.
India will emerge
as a viable supply base of solar products for global markets with a potential
to export $1.5-2 billion annually, according to industry players.
But it also says :
India will emerge as a viable supply base of solar products for global
markets with a potential to export $1.5-2 billion annually, according to
industry players.
“We estimate that safeguard duty may result
in a temporary increase of Rs. 0.50 per
unit of power, which will
progressively get neutralised as manufacturing capacities get ramped up in
India,” said ISMA.
MY TAKE :
* If Safeguard duty were to result in “ a temporary increase of Rs 0.50 per unit “ ,
why there
are no bidders in Maharashtra / Karnataka ?
And this despite
Power Minister, Shri R K Singhji saying :
“ The duty
structure prevailing on the day of the bid shall be implemented. Any
change in taxes and duties , would be passed through.
Current
bidding document provides for passing through taxes only
We would
provide for passing through taxes and duties “
{ Source : DNA / 15 March / Govt to amend solar bid
rule to allow pass-through of duty hike }
But , it
appears that the DISCOMS are not happy and if anything , want to
renegotiate
, even already entered PPA , downwards ,
since prices of solar panels
imported
from China , between July-Dec 2017 , has actually fallen by 25 % !
To meet its target
of 100 GW of solar by 2022 , India must add 1.5 GW every month , for the next
60 months .
That means , in the
next 24 months, it needs solar panels for adding 36 GW
According to
ISMA , it will take its member companies to achieve annual manufacturing
capacity of 15 GW , in those 24 months !
Considering
the following news report , is this likely to happen ?
{……domestic production stood at 246 mw in FY15 and is likely to
increase to
1,164 mw in the current financial year 2018 }
Given this
background , if a Safeguard duty is imposed, it is bound to result in our
missing the target.
What would
that lost generation ( possibly 40 GW - 50 GW ) cost our economy ?
How many
more jobs could our economy have added with that 50 GW ? and that too ,
at a tariff of Rs 2.44 per unit ?
And if that
tariff was to fall to Rs 1.5, could we possibly
create a MILLION jobs ?
At present, customs
duty on solar cells / modules / panels is levied at 7.5 %
and,
despite this , imported solar cells / modules / panels are 25 – 30 % cheaper
than local products !
In light of
this background , questions that the Policy Makers may want to ask, are :
Between the full
scale solar projects manufacturers and the roof top solar project manufacturers
, there are about 11 local companies .
How many persons do these employ , whose jobs are getting threatened by
cheap imports from China ?
How many more jobs
can we create , if we succeed in installing 50 GW of solar ( with imported
supplies ) in the next 24 months , instead of just 2 GW ( with local supplies )
?
If per unit price
of solar were to GO UP from Rs 3.5 to Rs 4.0 , how much will our
economy become “ expensive “ , and how will that impact our exports ?
On the other hand ,
if we altogether abolish that current custom duty of 7.5 % ( on the imports
from China ), can we possibly BRING DOWN the
currently quoted tariff from Rs 2.44 (
Bhadla in Rajasthan ) to Rs 1.5 per unit
, and turn India into a LOW COST
ECONOMY ?
27 March 2018
www.hemenparekh.in
/ blogs
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