India proposed to scrap duties on imports of solar-thermal equipment as it seeks to reduce project costs for Reliance Power Ltd. (RPWR) and other developers adding plants.

“Solar-thermal projects need encouragement,” Finance Minister Pranab Mukherjee said today in his annual budget speech, proposing to spare such ventures from the so-called special countervailing duty.

The exemption would lower costs for the seven companies building a third of India’s planned solar capacity using solar- thermal technology, which concentrates sunlight to boil water, used to power steam turbines. Reliance Power is importing turbines from Areva SA, while the others have ordered units from suppliers including General Electric Co. (GE) and Siemens AG. (SIE)

“These projects still haven’t imported most of their heavy items so this comes in time,” said Anil Kumar Lakhina, managing director of the Forum for Advancement of Solar Thermal, an industry group.

The special countervailing duty on imports is equal to the excise duty imposed on similar local products, Kumar Lakhina said. It’s a tax of about 8 percent to 9 percent on most equipment used to build solar-thermal plants, such as reflective mirrors and turbines, according to his estimates.

Solar-Thermal Expansion

The developers building India’s solar-thermal capacity, targeted at 470 megawatts by early 2013, are Reliance Power, Lanco Infratech Ltd. (LANCI), Godawari Power & Ispat Ltd., Aurum Renewable Energy Pvt., KVK Energy & Infrastructure Pvt., Megha Engineering & Infrastructures Ltd, and Abhijeet Group’s Corporate Ispat Alloys Ltd.

Mukherjee, in one of India’s most-watched policy announcements of the year, failed to deliver any other major incentive for the clean-energy industry.

The budget proposed to reduce excise duties on energy- saving light-emitting diode, or LED, lamps to 6 percent. It also indicated tax exemptions for lithium-ion batteries used in electric and hybrid vehicles, and for a coating chemical used in compact fluorescent lamps.

Companies had expected the budget to include renewable energy in a list of industries eligible for priority bank lending and for support to reduce interest rates, said Ramesh Kymal, head of the local unit of Gamesa Corp. Tecnologica SA, Spain’s biggest wind-turbine maker and a supplier in India.

Those omissions will make it harder to raise funding for wind farms in India, the third-largest market for new wind projects, according to Kymal. “We’re going to be in the queue for getting money,” he said. “Project financing is going to be a problem.”

By Natalie Obiko Pearson

Source: Bloomberg.com