The Union ministry of new and renewable energy (MNRE) has announced a rather steep basic custom duty (BCD) on solar modules and cells, effective April 1, 2022.
The decision, aiming to support the AatmNirbhar Bharat philosophy, will make imports costlier, in turn leading to greater reliance on domestic equipment.
The BCD on imported solar modules will be 40 per cent, while that on imported solar cells will be 25 per cent.
According to a government notification from the ministry of new and renewable energy, dated March 9, “the idea is to emerge as a leading global supplier of these items, besides meeting India’s requirements locally.”
The ministry has also directed all implementing agencies and stakeholders to make a note of the announcement and include it in the tender documents. Bidders are cautioned to take the BCD into account while quoting tariffs in all future bids where the last date of bid submission falls after this notification.
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The two items currently do not attract customs duty. The government has clarified that there will be no “grandfathering” of power projects that are already bid out, considering that a time period of one year is sufficient to help developers secure the required raw material in time.
MNRE has been preparing for imposing the BCD since Budget 2020 was announced when the duty was proposed. In September 2020, MNRE issued a notification asking solar PV manufacturers and associations to provide the list of machinery and capital goods to be exempted from BCD.
Reactions from industry
“We welcome the Ministry of New and Renewable Energy’s (MNRE) announcement of the Basic Customs Duty (BCD) implementation on imported solar cells (25 per cent) and modules (40 per cent) starting April 1, 2022. It is a testament of the government’s intent towards enabling Aatmanirbhar Bharat and making India the global manufacturing hub for solar energy. BCD implementation will provide the necessary impetus to create a self-sustaining ecosystem for solar equipment manufacturing in India, job-creation and reduce solar imports.
We also request the MNRE to also consider exempting BCD levy on manufacturing units located in Special Economic Zones (SEZs). Considering that 43 per cent of solar panel manufacturing units and 63 per cent of solar cell manufacturing units are located in SEZs, imposing BCD on SEZ units will impact the domestic solar manufacturing ecosystem. Imposition of BCD on SEZ units will make them highly uncompetitive resulting in underutilization of capacities, loss of investment and jobs. There will be a question mark on the very existence, and survival of module manufacturers in SEZ units. We urge the MNRE to consider our request and bring forth clarity in favour of building a true Aatmanirbhar Bharat.”
—Gyanesh Chaudhary, Managing Director, Vikram Solar
“High import duties will certainly lead to a significant increase in the cost of generation across all solar segments. Import barriers can only be temporary measures. Eventually, Indian manufacturing will succeed only if we are able to compete in the global marketplace – in terms of price, technology, and scale”.
—Ms Ritu Lal, Senior VP & Head – Institutional Relations, Amplus Solar
“This move will slow down the race towards the 175 GW target by 2022 i.e. next year. Although this removes considerable uncertainty but the rates are too high and will increase the cost of solar power for discoms and consumers alike. This will increase the cost of manufacturing power as well as other industries in India. We understand that the intent of the government is positive and they want to encourage domestic manufacturing but the method should have been different. The government should have provided direct manufacturing subsidies to manufacturers to help them scale up their capacities and this would have been beneficial to the sector.”
—Pinaki Bhattacharyya, CEO & MD Amp Energy India
The recent move by the Government of India to impose 40 per cent basic customs duty on solar modules and 25 per cent on cells will definitely give a fillip to the solar manufacturing sector. This is in line with our Prime Minister’s vision of Atma Nirbhar Bharat and Vocal for Local initiatives, although solar continues to remain a fledgling sector in India and we still have a long way to go to cater to the demand supply gap. The increased cost of raw materials eventually results in the price hike of finished products thus hampering project completion. Rationalizing pricing and production will propel the growth of the solar manufacturing sector accruing benefits for developers as well.
While we are in favour of the imposition of customs duty, we would urge the Government to relook at the production capacity the sector currently holds and implement measures accordingly. This will ensure smoother and faster execution of projects thus aiding the country to reach its optimum installations and capacity.
—Imaan Javan, Director of Operations, Suntuity REI
