May 1 2018 | Focus

Solar Insights | Q&A with Raj Prabhu, CEO and Co-founder of Mercom Capital Group

Currently, we are forecasting investments in the solar sector to slow down along with installations in 2018. Uncertainties created by trade cases with possible safeguard and anti-dumping duty imposition will have a direct negative impact on investments unless the government acts fast to resolve these issues in a way that creates confidence among the investment community.

Raj Prabhu, CEO and Co-founder of Mercom Capital Group shares insight with Sandeep Sharma about the current challenges before the solar sector, need to stabilise solar tariff, fast tracking solar manufacturing, and future of solar roof top segment in India. Edited excerpts...

What are the current challenges before the solar sector in India? And what's your recommendation to mitigate the rising challenges?
The uncertainties of hike in import duty, proposed safeguard and anti-dumping duty were affecting the solar activity and as a relief MNRE has issued guidelines to allow for pass through of the costs incurred if these extra duties are added due to change in law. The government should explain these guidelines and provide clarity as to how these guidelines will be implemented. The tenders are being announced with no certain timelines for auctions and many tenders are either being postponed or cancelled. This should be avoided and the government has to have a clear roadmap.

What's your take on the need to stabilise Solar Tariffs in India?
The market forces will ultimately decide at what level the tariffs will stabilize. Most of the aggressive bids were a result of desperation when the auction activity had drastically fallen. If the government gives a clearly visibility and timeline for the auctions and follows it diligently these knee jerk bids can be avoided. We are already seeing the tariffs slowly stabilize in the past few auctions. But the challenge is that solar tariffs can become artificially high if government imposes duties.

What needs to be done to push solar module manufacturing in India on a fast track?
The government has announced incentives and power subsidies for expansion of module manufacturing. As of now various module manufacturers have put forth plans to develop 4 GW of solar component manufacturing in India. The SECI has also floated an EoI to develop 20 GW of solar manufacturing in the next three years in India. The only need now is proper and timely implementation. Most manufacturers need capital at low interest rates.

What's the future of solar rooftop segment in India?
The rooftop sector in India is not growing exponentially as it needs stronger support from the Indian government. It is also suffering because there is also a lot of ambiguity with net-metering policies and DISCOMs are restricting project capacity to 1 MW. The biggest challenges now facing the rooftop solar industry is a lack of policy support and lacklustre net-metering enforcement. Demand was also dampened in 2017 when accelerated depreciation (AD) rates were slashed and the added tax incentives were discontinued. The small and medium enterprises (SME) sector in India comprises a much larger chunk of the rooftop solar market than the corporate sector. This is because when the added tax incentive was discontinued and the AD was slashed, it became much more expensive for the SME sector to utilize rooftop solar.

The government should be taking the initiative to provide a single window of clearance for rooftop projects of up to 250 kW, as this will save time and help in controlling project cost. Currently, the Chief Electricity Inspectorate to Government (CEIG) has to inspect each rooftop solar project and grant it charging permission, which can take months.

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