Mumbai: In the face of mounting pressure from both the renewable energy industry and courts, the government has temporarily suspended the 25% safeguard duty on solar cells and modules imported from China and Malaysia. In a letter to the Chief Commissioner of Customs dated August 13, and seen by Mint, the government has asked customs officials “not to insist on payment of safeguard duty, for the time being".

The latest notification recognizes the stay till 20 August on the duty that the Odisha High Court had ordered on July 25.

Monday’s government order, signed by Under Secretary Mohit Tewari, has asked that the safeguard duty on solar cells and modules imported into India “be assessed provisionally on furnishing a letter of undertaking/bond by the concerned person."

The duty had come into effect on 30 July on an order of the Ministry of Finance, based on the recommendation of the Directorate General of Trade Remedies. The safeguard duty of 25% was applicable for a period of one year from 30 July, followed by a reduction to 20% in the first six months of the second year and a further reduction to 15% in the latter half of second year.

The government said that the safeguard duty would ensure a market for domestically manufactured products. Roughly 90% of the solar cells and modules used in India are imported from China and Malaysia, which are cheaper than those manufactured locally.

The Finance Ministry on 31 July notified the imposition of 25% safeguard duty with immediate effect on imported solar cells and modules, overruling a stay till 20 August on the safeguard duty which solar power producer Acme Solar had won at the Odisha high court.

Separately, on Monday, the Madras High Court had told Chennai port’s customs officials to provisionally release the module shipment of solar power producer Shapoorji Pallonji Infrastructure Capital without paying the safeguard duty, the website Mercom India reported.

Credit rating and research agency ICRA said in a recent report that this 25% duty would result in an increase in the capital cost for a solar power project by 15%, which in turn would result in an increase in tariff by about 30-35 paise per unit to maintain a similar level of return for project developers.

Solar power prices had fallen to a historic low of 2.44 a unit in May, backed by cheap product imports from China, but were expected to head north if the cost of imported modules were to rise.

Acme Solar, one of the largest renewable energy players in India, had threatened to pull out of projects that it had won if the company had to bear the cost of the safeguard duty.

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