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The Indian wind industry, already not in a particularly good shape owing to a variety of reasons, is busy trying to ward off two potential threats – GST and safeguard duty on imported steel plates.
The Goods and Services Tax is likely to raise the cost of wind turbines by around ₹30 lakh a MW. A wind machine today costs around ₹6.5 crore a MW.
The impact of a duty on imported steel plates will be harder—the Indian Wind Turbine Manufacturers' Association (IWTMA) calculates that the duty will increase costs by another ₹40 lakh a MW. Last month, the Directorate General of Safeguard of the Ministry of Commerce, initiated ‘safeguard investigation’ on imports of hot rolled steel coils, in response to a petition filed by four Indian steel manufacturers—SAIL, Essar, Jindal Steel and Power and JSW Steel.
The wind industry needs steel plates mainly for making towers on which the turbines stand. Towers account for about 10 per cent of the total system cost.
The industry is in no shape to absborb a rise in costs. Already, wind power producers are seeing tepid demand as state governments (major customers) are less keen on wind energy with it turning costlier than solar (see ‘What’s in store for 2016’, BusinessLine, January 6, 2016.)
In 2014-15, the country saw fresh wind power installations of 2,312 MW. Current year’s figures may not exceed that level, though the hopes were for upwards of 3,000 MW. A war is raging between turbine manufacturers and their customers, the power producers, over pricing of the machines, each accusing the other of unfairness. Manufacturers fear that the market would force them to absorb increases in costs, eating into their fragile margins. “A duty on imported steel plates will kill the industry,” says D V Giri, Secretary General of IWTMA.
The Ministry of New and Renewable Energy has thrown its weight behind the wind industry, trying to convince the Ministry of Finance to exempt wind turbines from GST.
Giri says the industry is preparing a case to fight any import duty on steel plates. It will argue that because business from wind turbine manufacturers is small, steel plate producers focus less on satisfying their demand. For steel companies the bigger customers are automobile and power equipment manufacturers. As such, they do not deliver on time.
Secondly, according to Giri, the quality of Indian products is not good — they crack while bending, causing need for welding.
On their part, steel manufacturers claim “serious injury” from imports, and show rising imports — 3.23 lakh tonnes in 2013-14 to 6 lakh tonnes in 2014-15, and estimated 7 lakh tonnes in the current year — to seek a safeguard duty, (which is a duty that the world trade rules allow a country to impose on a product, whenever there is a spike in imports).
But the wind industry still wants the safeguard duty to be kept out. The IWTMA is expected to seek an exemption for steel used for the manufacture of wind towers. If the government is concerned about end-use, the industry is ready to import only profile-cut plates (which cannot be put to other uses), says Giri.
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