Government’s decision to impose basic customs duty on solar imports will lead to a spike in tariffs: ICRA

Rating agency ICRA NSE -0.06 % has noted that the government’s decision to impose basic customs duty on solar imports will lead to a spike in tariffs of nearly 25% in the short term, but will prove to be a positive for the domestic manufacturers in the long term.

“This is expected to result into an increase in the capital cost for a solar power project by 23-24% (capital cost factoring non-continuation of safeguard duty beyond July 2021). This in turn would result in an increase in tariff by about 45-50 paise per unit,” said Girishkumar Kadam, co-group head at ICRA Ratings.

Kadam said that despite the spike, tariffs will not cross the 3-rupee upper limit, which would continue to remain cost-competitve from the point of view of the off-takers.