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The market for solar components is dominated by Chinese firms. (Bloomberg)
The market for solar components is dominated by Chinese firms. (Bloomberg)

Solar module imports to face 40% customs duty, cells 25%

The finance ministry will issue an order to impose a basic customs duty of 40% on modules and 25% on solar cells as part of the Atmanirbhar Bharat or self-reliant India strategy, Singh said in an interview

India plans to impose new tariffs on imports of solar cells and modules from 1 April 2022, power and renewable energy minister Raj Kumar Singh said.

The finance ministry will issue an order to impose a basic customs duty of 40% on modules and 25% on solar cells as part of the Atmanirbhar Bharat or self-reliant India strategy, Singh said in an interview. The customs duty will replace a 15% safeguard duty that is being imposed on imports from China and Malaysia.

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Such a move will make solar cells and modules imported from China expensive and is being seen as part of an economic response to the violent face-off with China along the Ladakh border. Along with leveraging its growing green energy market to boost manufacturing, India is looking to play a larger role in global supply chains.

“Earlier we said it will be imposed from next year. From 2021—that’s the way we had sent the trajectory," Singh said in an interview.

While the budget had okayed an enabling mechanism for imposing a basic customs duty of 20% on cells and modules, challenges related to adequate domestic production capacity and how clean energy projects that have been bid out based on lower equipment costs will be treated prompted the Centre to rethink the plan. There were also discussions about whether the duty will be compliant with World Trade Organization rules.

The market for solar components is dominated by Chinese firms. A surge in imports prompted the government to impose a safeguard duty from 30 July 2018 on solar cells and modules imported from China and Malaysia. The safeguard duty, which was set to expire on 29 July, has been extended by a year.

Earlier, the ministry of new and renewable energy was in favour of imposing basic customs duty from 1 April 2021. As part of the plan, India was looking at grandfathering the previous bids that were awarded by allowing a pass-through in power tariffs for projects awarded before the basic customs dutywas to be imposed to protect solar project developers. The plan was later dropped.

“We will announce it now," Singh said. “Since we have manufacturing capacity for modules, so more BCD has been levied on that (modules). On cells, we have a manufacturing capacity of only 2,000MW. Our actual consumption that is going to happen progressively will almost touch 20-30GW per year. That is going to be our requirement at the rate I am going. So, cells have to be imported as we only manufacture 2,000MW here."

This will also help attract foreign firms exploring a China-plus-one strategy for production. India imported $2.16 billion worth of solar photovoltaic (PV) cells, panels and modules in 2018-19. “The demand is here. We are the fastest growing (market)," Singh said.

An investment of 4.7 trillion has been made in India’s renewable energy space in the past six years, with an expected 1 trillion investment opportunity annually till 2030.

Prime Minister Narendra Modi has said India’s aim is to end its dependence on import of all equipment. The government has come out with a production-led incentive scheme that offers manufacturers in 10 sectors, including those for high-efficiency solar modules, benefits worth 1.97 trillion.

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