The government is weighing the option of lowering the proposed 70-per cent safeguard duty on imported solar modules and panels from China and Malaysia recommended by the Directorate-General of Safeguards as power producers have complained that the move will significantly increase generation costs and render some projects unviable.

The Standing Board on Safeguards, headed by the Commerce Secretary, which is currently examining the proposal, is yet to make its recommendation to the Finance Ministry as it is deliberating upon the appropriateness of the high duty proposed by DG Safeguards, a government official told BusinessLine .

“It is a tricky situation. While domestic manufacturers of solar panels would definitely benefit from a steep safeguard duty, what can’t be ignored is the debilitating effect it would have on power producers as it would result in a steep increase in cost of production,” the official said.

The proposal to impose a 70 per cent provisional safeguard duty for 200 days was taken following an investigation by DG safeguards based on a complaint filed in December 2017 by five domestic manufacturers including Adani Enterprises Ltd-backed Mundra Solar PV Ltd, Indosolar Ltd and Jupiter Solar Power Ltd.

The preliminary findings indicated that the domestic industry is experiencing significant losses and increasing unsold inventory due to cheaper imports, specifically from countries like China and Malaysia.

However, a high duty of 70 per cent on modules and panels from China and Malaysia has the potential of putting at risk up to 3 gigawatt of solar projects worth over ₹12,000 crore under implementation, said an analysis by rating agency Crisil, published shortly after DG Safeguards came up with its proposal last month.

“The safeguard duty proposed will also inflate project costs by 25 per cent and crank up viable tariff to ₹3.75 per unit from around ₹3 estimated earlier, making solar power less attractive to discoms. That would also be more than the average power purchase cost of 10 out of 14 discoms last fiscal,” the report said.

The US President Donald Trump, too, imposed a 30 per cent duty on solar panels, which was less than half of India’s recommended duties, the official said. “It is important for all countries to promote solar power generation domestically, that is why Trump, too, limited import duties on solar panels to 30 per cent,” he said.