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India Should Limit Solar Duties to Shield Investments, Tata Says

India should refrain from slapping retroactive duties on solar power plants already under construction to avoid disrupting investment into the industry, a unit of the nation’s biggest industrial group said.

The government needs to impose the tariffs it is planning in a way “that existing projects don’t get affected,” said Ajay Goel, chief executive officer at Tata Power Solar Systems Ltd, which makes photovoltaic panels for project developers including another unit of Tata. The commerce ministry, which recommended duties in May, hasn’t said whether they should be levied on projects signed before the decision.

India’s proposed levies are part of a broader protectionist trend sweeping across the U.S., Europe, and Australia, mainly targeting Chinese companies after a global supply glut pushed panel prices down by about half. Local developers are protesting the levies, saying the fee would stall three-quarters of existing projects in India.

Companies developing projects say the levy would threaten Prime Minister Narendra Modi’s ambition to spread solar energy to every home in India, which is part of his effort to reduce blackouts and provide power to the poor.

A way to avoid chilling investment and to still support a local manufacturing industry would be to hit only future projects with the levy and to provide a clear timeline for the measures to take force, Goel said.

The commerce ministry recommended duties of 11 cents to 81 cents a watt. Developers led by Welspun Energy Ltd. say that would double the cost of solar power.

Goel rejected those projections, saying duties would boost panel prices by about 20 percent. That increase, spread out across the two-decade lifetime of the average photovoltaic plant, would mean the cost of solar power would rise to about 8 rupees (13 cents) to 9 rupees a kilowatt-hour, he said.

Bids in a February national auction of solar licenses priced electricity from imported solar equipment at an average of 6.5 rupees a kilowatt-hour.

The Ministry of Finance has until Aug. 22 to implement the duties.

Copyright 2014 Bloomberg

Lead image: Taj mahal via Shutterstock

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