Power projects may not be able to use 'grandfather' clause for Chinese imports, according to MNRE

NEW DELHI: Renewable projects commissioned already commissioned might not be able to take advantage of the "grandfather clause" to import any solar equipment from China, after the government earlier assured them of such an exemption.
The issue arose after the Ministry of Finance was reluctant to approve of any exemptions, said people present at a meeting with the Ministry of New and Renewable Energy on Friday.

Adding a "grandfather clause" to existing power purchase agreements would mean that there is an understanding between solar developers and the government that the project costs more than the allocated budget at the time of closing of the deal, and hence, compensation will be provided to the developers via the distribution companies.

Instead, a formula based on the coal cess is likely to be implemented to recover the losses incurred due to the safeguard and basic customs duties, sources told ET.

Although this is expected to provide relief to the generators, consumers might bear the immediate brunt of such a policy.

"When projects are mapped out, they are done so with a very specific budget in mind. Because of the lack of grandfathering or pass-throughs, the financials of these projects will have to be reworked, and might put some of them in danger," said a developer, requesting anonymity.

The government will also go ahead with an interest subvention of 5% to cell manufacturers, as union power and renewable energy minister RK Singh had told ET earlier in an exclusive interview. An additional 3% waiver will be given in the form of the cross-subsidy surcharge if the manufacturing plant also makes ingots and wafers.

A basics custom duty was supposed to be imposed from August 1 to prevent the dumping of Chinese goods and protect national interests, Singh said.

Last week, the government decided to continue imposing safeguard duty on such imports for a third consecutive year. The basic customs duty was expected to replace the safeguard duty, as the former can only be imposed for a maximum of four years, and has to be progressively lowered, owing to World Trade Organisation's (WTO) safeguard measures. A duty of 14.9% will be levied on Chinese imports for six months from July 30, 2020 to January 28, 2021, while the duty will be slightly lesser at 14.5% in the following six months.

Earlier in June, the power and renewable energy minister told reporters and industry stakeholders that projects signed before August 1 would be eligible for the "grandfather" clause, which would have allowed renewable energy firms to claim reimbursements on the duty they have paid while importing equipment from China, where 80% of Indian solar imports are sourced from.