March 28 2012:
India’s finance minister, Dr. Pranab Mukherjee, declared that concentrating solar thermal plants and equipment in India will now be exempt from import duty.
“In order to fully realize our potential in the realm of solar energy, solar thermal projects need encouragement. I propose to fully exempt plant and equipment etc. for the initial setting up of such projects from special countervailing duties (anti-subsidy import duty)”; said the minister while announcing plans for the country budget for the upcoming fiscal year.
Till now the concentrated solar thermal sector has significantly lagged behind the solar photovoltaic (PV) sector in the Indian market, BRIDGE TO INDIA, a consulting firm based out of New Delhi, reports.
CSP installed capacity in India is a mere 8.5MW (as of February 15th, 2012) as compared to 481.48MW for PV technology. There is no domestic manufacturing base for CSP equipment in India and there are only a handful of experienced technology providers abroad
As such, developers are finding it difficult to find reliable, low-cost options, a necessity to make their projects viable at the low tariffs following the NSM auctions in the year 2011. With an absence of CSP technology in India and a lack of projects for reference, banks are exceptionally wary of funding CSP projects. This has led to stunted growth of the Indian CSP market, BRIDGE TO INDIA notes.
In addition, CSP as a technology faces water issues that will require CSP developers come up with creative plant cooling solutions. There is also consternation about the 30% local content requirement.
India proposed to scrap duties on imports of solar-thermal equipment as it seeks to reduce project costs for Reliance Power Ltd. (RPWR) and other developers adding plants.“Solar-thermal projects need encouragement,” Finance Minister Pranab Mukherjee said in his annual budget speech, proposing to spare such ventures from the so-called special countervailing duty.
The exemption would lower costs for the seven companies building a third of India’s planned solar capacity using solar- thermal technology, which concentrates sunlight to boil water, used to power steam turbines. Reliance Power is importing turbines from Areva SA, while the others have ordered units from suppliers including General Electric Co. (GE) and Siemens AG. (SIE)
“These projects still haven’t imported most of their heavy items so this comes in time,” said Anil Kumar Lakhina, managing director of the Forum for Advancement of Solar Thermal, an industry group.
The special countervailing duty on imports is equal to the excise duty imposed on similar local products, Kumar Lakhina said. It’s a tax of about 8 percent to 9 percent on most equipment used to build solar-thermal plants, such as reflective mirrors and turbines, according to his estimates.
The developers building India’s solar-thermal capacity, targeted at 470 megawatts by early 2013, are Reliance Power, Lanco Infratech Ltd. (LANCI), Godawari Power & Ispat Ltd., Aurum Renewable Energy Pvt., KVK Energy & Infrastructure Pvt., Megha Engineering & Infrastructures Ltd, and Abhijeet Group’s Corporate Ispat Alloys Ltd.
According to BRIDGE TO INDIA, while the key challenges to CSP in India remain, an exemption of import duty on plant and equipment contributes to an overall reduction of CSP project costs. This will invite greater investment in the Indian CSP market.