Crisil Ltd. Reports Rs. 28,000 Cr of Solar Projects at Risk Due to Rupee Slide

In spite of Prime Minister Narendra Modi’s push for solar technology, an initiative that has lost steam within the tenure of this government, it appears that macroeconomic pressures of the Indian rupee slide in the recent past will jeopardize the completion of approximately Rs. 28,000 crores worth of solar projects all across the country. The reason for this, according to Crisil Ltd. is that for drops in the value of the currency, the commensurate cost of setting up solar projects where most of the equipment is purchased from outside India become much considerably higher.

In its report, the ratings agency said, “Nearly half of the solar power capacities under implementation worth R. 28,000 crore face viability risk because of the continuous fall in the rupee, which has made imported solar modules costlier and increased the cost of setting up solar plants. These include 5.5GW of projects bid out in the past nine months at very low tariffs of Rs. 2.75 per unit or less. These projects are in the early phase of implementation and are unlikely to have bought solar modules, orders for which are typically placed 9-12 months after bids are won.”

Senior Director for CRISIL Ratings, Subodh Rai echoed this finding, saying, “Our analysis shows that for every 10% drop in the rupee, the cost of setting up a solar power plant increases by Rs. 30 lakh per MW, assuming other factors remain unchanged.” Although the potential for solar power was not fully explored until recently, it appears that a dependence on external markets for the technology, as well as policies that are affecting the value of the currency are very likely to cause a major disturbance to environmentally-friendly power generation in India.