From the Viewsroom

Solar blues

M. Ramesh | Updated on: Feb 05, 2019
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The Centre’s conflicting signals are doing the solar sector no good

One part of interim Finance Minister Piyush Goyal’s Budget speech struck me as rather rummy — the reference to solar. One might argue that the Budget speech is not quite the place for it. However, for something that Goyal had a personal role in his earlier capacity as the Energy Minister, the discourse on it was too brief and hush-hush, like Aunt Agatha introducing Bertie Wooster to a group of respectable guests.

India’s solar generation capacity, he said, had grown 10 times in the last five years. This is no data fudge. Installed solar capacity grew from 2,685 MW on June 30, 2014 to 24,567 MW at the end of November 2018, and more has been added since then. But, after justifiably twirling his moustache over the past achievements, the Minister could have said a word or two about the sector’s immediate future. The reason is perhaps that things are not well with the sector. Solar in India resembles a sprinter who has run into an invisible wall. First came the safeguard duty. Though it was brought down to 25 per cent from 70 per cent, it helped nobody who had a skin in the game. It needlessly raised costs and raised doubts over the government’s intentions. Then came the illogical ‘cap’ on tariffs that energy companies quote in bids. In federal government capacity auctions, energy companies shall not offer to sell solar electricity at more than ₹2.50 a kW (₹2.68 if the safeguard duty applied). Now, this is a classic case of ‘heads I win, tails you lose’. The government should decide whether tariffs should be fixed or market-determined — a hybrid with in-built hedge for the buyer’s benefit is not only immoral but also impractical, because it will only keep serious investors away. Added to this is the frequent cancellation of tenders after the bids are opened just because the best tariffs are not as low as the government wanted.

If these policy measures are not reversed forthwith, a swanky International Solar Alliance headquarters is all India will have to be proud of.

Published on February 05, 2019

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