Shadow casts over Modi govt’s ambitious solar target as capacity addition slows down, says report.

Capacity addition in solar energy sector has slowed down on account of lack of clarity on several policy issues and arbitrary bid cancellations, casting shadow over developer’s sentiment, a report said. In wake of delayed capacity additions, development of the solar energy sector has constrained, CRISIL Research said in a report.

“There were frequent bid cancellations, lack of clarity on GST procedures, and cost pressure from the imposition of the safeguard duty on imported cells/modules. While, GST clarity was lacking for over a year with a final decision taken in December by the GST council, it ended with an increase in taxation compared to what was expected by the industry,” the report noted.

Modi government has set an ambitious target of having 175 GW of renewables including 100 GW of solar energy by 2022. The report expects solar power capacity additions of 48-50 GW between fiscals 2019 and 2023.

The report also stated that in view of the current regulatory haze, the outlook has been revised downward. The CRISIL Research continued to monitor the same and remain aware of a possibility of upsides to our call, once regulatory risk is mitigated to an extent.

In addition, it stated that adequate land availability, timely implementation of grid infrastructure, and the ability of players to raise low-cost funds will also be crucial enablers going ahead.

Nevertheless, the outlook still remains fairly positive for the sector as the government remains ambitious about achieving its fiscal 2022 target.