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NEW DELHI : The government has decided to impose 40% basic customs duty (BCD) on solar modules and 25% on solar cells from 1 April 2022, in a move that would make imports costlier and encourage local manufacturing.

According to a 9 March notification from the ministry of new and renewable energy, the idea is to emerge as a leading global supplier of these items, besides meeting India’s requirements locally.

The two items, which currently do not attract BCD, will come under it at the specified rates from 1 April 2022. There will be no grandfathering of power projects that are already bid out, considering the one-year period is sufficient to help developers secure the required raw materials in time.

Mint earlier reported India’s plans to impose new tariffs on imports of solar cells and modules from 1 April 2022, citing power and renewable energy minister Raj Kumar Singh.

“The ministry of finance has also advised that the customs notification in this regard shall be issued at the appropriate time," the notification said.

The customs duty will replace a 15% safeguard duty currently imposed on imports from China and Malaysia. The development follows the government announcing a production-linked incentive (PLI) scheme that offers manufacturers in 10 sectors, including those of high-efficiency solar modules, a total benefits of 1.97 trillion. The plan has gained traction with 15 companies considering total investments of around $3 billion to build solar equipment manufacturing facilities here, as reported by Mint earlier.

“Presently, India’s solar sector, just like in any other country, is reliant on imports of solar equipment. The government has also noted instances of certain countries dumping solar cells and modules to kill the nascent domestic industry because of which the government had to impose safeguard duties," the notification said.

The market for solar components is dominated by Chinese firms. India imported $2.16 billion worth of solar photovoltaic (PV) cells, panels and modules in 2018-19. 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.

“The covid-19 pandemic brought disruptions in international trade, including imports of solar modules and solar cells, affecting solar capacity additions. Considering India’s huge solar targets and that electricity is a strategic sector of the economy, India needs to develop domestic solar manufacturing capacities and reduce its dependence on imports to avoid disruption," the notification added.

The move will make solar cells and modules imported from China expensive. Along with leveraging its growing green energy market to boost manufacturing, India is looking to play a larger role in global supply chains.

“The Atmanirbhar Bharat initiative has geared up the country toward scaling up domestic manufacturing. Scaling up domestic solar manufacturing would also enable India to export solar cells/modules. This would also provide other countries with an alternative avenue for procuring solar cells/modules," the notification said.

India is running the world’s largest clean energy programme to achieve 175 gigawatts (GW) of renewable capacity, including 100GW of solar power by 2022. According to the Central Electricity Authority, by 2030, the country’s power requirement would be 817GW, more than half of which would be clean energy, and 280GW would be from solar energy alone. To achieve the target of 280GW, around 25GW of solar energy capacity is needed to be installed every year till 2030.

Earlier, the ministry of new and renewable energy was in favour of imposing BCD 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 BCD was to be imposed to protect solar project developers. The plan was later dropped.

“In view of above, the undersigned is directed to inform all RE implementing agencies and other stakeholders, to take note of above trajectory and to include provisions in their bid documents, so that bidders take the trajectory into account while quoting tariffs, in all bids where the last date of bid submission is subsequent to this office memorandum. In all such bids, the imposition of BCD as per above trajectory shall not be considered as change- in-law," the notification said.

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