NEW DELHI: In what will make solar cells, modules and inverters imported from China expensive, India is set to impose a basic customs duty as soon as the safeguard duty, currently in place, expires on 29 July, said two people aware of the development.
To impose this 20% tariff barrier on imports of green energy equipment, the ministry of new and renewable energy will soon write to the ministry of commerce and industry.
Also, to ensure that the already bid out projects and the electricity tariffs quoted are not hit, the government plans to ‘grandfather’ such projects and is collating details along with the tentative equipment import date.
Mint reported on Monday about India’s plan to take a call on the date from when the basic customs duty will be imposed.
The National Democratic Alliance (NDA) government had imposed the safeguard duty on solar cells and modules imported from China and Malaysia on 30 July, 2018.
“The basic customs duty on solar cells, modules and inverters will be imposed shortly. The ministry of new and renewable energy will shortly be writing to the commerce ministry for imposing the same as soon as the safeguard duty ends," said a senior government official requesting anonymity.
According to government documents reviewed by Mint, the ministry of new and renewable energy was earlier in favour of imposing the duty from 1 April 2021.
To be sure, the Union Budget for 2020-21, presented by finance minister Nirmala Sitharaman earlier this year, had approved an enabling mechanism to raise tariffs on imports of green energy equipment that involved imposing a basic customs duty of 20% on cells and modules.
This comes in the backdrop of the India contemplating an economic response after the recent violent face-off with Chinese troops along the border in Ladakh left 20 Indian soldiers dead and at least 76 injured.
The fast-growing domestic market for solar components is dominated by Chinese companies due to their competitive pricing. India imported $2.16 billion worth of solar photovoltaic (PV) cells, panels, and modules in 2018-19. The surge in imports had led the NDA government in its previous term to impose a safeguard duty.
India currently has a domestic manufacturing capacity of 3 GW for solar cells and recently awarded a manufacturing-linked solar contract that will help in establishing additional solar cell and module manufacturing capacity.
Modules account for nearly 60% of a solar power project’s total cost.
Clean energy projects now account for more than a fifth of India’s installed power generation capacity, with the country becoming one of the top renewable energy producers globally with ambitious capacity expansion plans.
This also follows the Centre's move to only allow manufacturers who are approved by the Bureau of Indian Standards and the ministry of new and renewable energy to be eligible for government supported schemes, including projects from where electricity distribution companies procure solar power for supply to their consumers.
India is also looking to play a larger role in global supply chains in the backdrop of the disruption caused by the coronavirus that originated in Wuhan, China.
China remains India’s second largest trading partner after the US. India’s exports to China rose 3.8% to $17.1 billion in 2019 while imports contracted 7.5% to $68.3 billion during the same year. The widening bilateral trade deficit with China has remained a cause of concern for India.