Update: MNRE Clarifications on Change in Law for Solar Projects

The change in law clause deals with changes in taxes which have a direct effect on the economics of a project


The Ministry of New and Renewable Energy (MNRE) recently issued a clarification on the August 2017 guidelines for the tariff-based competitive bidding process for  grid-connected solar photovoltaic (PV) projects.

However, the clarifications – which were introduced by the MNRE to support the domestic solar industry – have still not managed to alleviate any stakeholder concerns due to confusion around the processes that project developers must follow in order to avoid duties on solar imports.

According to an MNRE official, the ministry has now clarified Clause 20 of the guidelines, which deals with changes in law of tax rates, and has a direct effect on the economics of any solar project.

To remove the ongoing uncertainty, the government clarified that the term “change in the rates of any taxes” as mentioned in Clause 5.7.2 of the guidelines includes “change in rates of taxes, duties and cess.”

The addition of duties and cess in the clause implies that when a duty or cess is changed, the solar power generator or procurer will be entitled to compensation by the other party, as reported previously by Mercom.

The Clarification

“This is a mere elaboration of the clause and not an amendment,” the official specified. “The changes in the guidelines will apply and hence will not have any drastic effect on the tenders that have been already issued.”

Had it been an amendment, it would have had to be approved in parliament. The official further said that since this is a clarification, it will be retrospective and will not need the cabinet approval.

The change in law, however, does not include any change in taxes on corporate income or any change on withholding taxes on income or dividends.

The change in the guidelines comes on the heels of Madras High Court’s dismissal of the petition filed by project developer, Shapoorji Pallonji, against the levy of a 70 percent safeguard duty on solar imports. This dismissal has paved the way for the probable imposition of a safeguard duty on solar modules and cells imported from China, Malaysia, and Taiwan, after the Office of Directorate General of Safeguards concludes its investigation (which was stalled  in the courts).

As the eventual fate of safeguard duty draws closer, the domestic solar industry is still reeling under ambiguity, and seeks a better understanding of the compensation mechanism put in place by the government.

Ankita Rajeshwari Ankita is an editor at MercomIndia.com where she writes and edits clean energy news stories and features. With years of experience in the news business, Ankita has a nose for news and an eye for detail. Prior to Mercom, Ankita was associated with The Times of India as a copy editor for the organization’s digital news desk. She holds a Bachelor’s degree in Psychology from Delhi University and a Postgraduate Diploma in journalism. More articles from Ankita Rajeshwari.