As India focuses on installation of 175 Gigawatt of renewable energy by 2022, power purchase cost is expected to rise as solar modules becomes costlier following the levy of Goods and Services Tax (GST), customs duty and potential levy of anti-dumping duty.
GST
The solar modules have become costlier after the introduction of GST. The government levies a 5 percent tax on all equipment needed for generating solar power compared with nil duty now.
Safeguard duty
In addition, the government is planning to impose a 70 percent safeguard duty on solar equipment exports from China and a few other countries to protect domestic manufacturers. Such a duty may hurt prospects of the big project developers in India.
Customs duty
Over $150 million worth of solar modules were stuck at various Indian ports due to a disagreement over their classification and the import tax applicable to them.
Also, charges levied owing to only ~25% utilization of transmission lines by renewable energy sources will add to the cost of the grid. Rising penetration of renewable energy will also result in frequent cycling and lower plant load factors at coal-based plants, thereby leading to higher variable cost.