Gov likely to levy customs duty on solar gear: report
24 Aug 2020
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The government is expected to levy customs duty on solar modules, cells and inverters amidst competing demands by manufacturers and traders to save their business from collapse, according to some reports.
The Narendra Modi government in its urge to ensure that the domestic manufacturers get an additional push to expand capacities is likely to levy import duty on solar gear. The government wants to give an impetus to greater self-sufficiency with its emphasis on `Atmanirbhar Bharat’.
A CNBC report citing sources said while the government proposes to levy customs duty on solar modules, cells and inverters, it may exempt bid out solar projects from the customs duty hike.
The report cited detailed discussion on the issue by the prime minister's office (PMO), revenue department, commerce and the ministry of new and renewable energy on 20 August and that the levies will made effective soon.
"The proposal, which has been cleared post discussions with PMO, is to levy 10 per cent basic customs duty on solar modules and 20 per cent on solar inverters from October 2020, which will then be hiked to 40 per cent on solar modules and 25 per cent on solar cells from 30 July 2021," the report stated citing multiple sources.
It may be noted that the government had recently extended 15 per cent safeguard duty on solar cells, modules and inverters till 29 July 2021.
"The measures come with a backdrop to reduce India's import dependence on Chinese products as close to 80 per cent of the imports of solar cells, modules and inverters are from China," sources added.
Union power minister RK Singh had, in July, said India needed to restrict import of power equipment as it posed security threat to the power system in the country. Singh had highlighted that the government is pushing for measures to make India self-reliant in both power and solar power sectors.
"We have decided not to buy any power equipment from China. We are going to release a list of prior reference countries which will include China and Pakistan. The government will not give any permission for imports from prior reference countries. Import from any other country will be inspected under stringent norms because the power system is a sensitive system," Singh had said.
"The power systems are vulnerable to cyber attacks because of Trojan and malware. This can also lead to power shutdown, and then communication lines will be impacted and lead to a database crash in manufacturing, defence industries, etc. Most of the equipment imported is made in India. I urge even states to not use power equipment which is made in China," he added.
India imported power equipment worth Rs71,000 crore in FY19, and about Rs21,000 crore worth equipment alone was imported from China. The country has a target of 175 GW of renewable capacity by 2022, of which 100 GW target is for solar capacity.
Imports have undermined domestic capacity available with solar power equipment manufacturers such as Vikram solar, Adani group, Tata Power, Moser Baer and BHEL.
India imported solar cells and modules worth $1.3 billion from China in FY2019-20. Domestic manufacturers have demanded a level playing field to compete against cheaper imports.
All India Solar Industries Association (AISIA) has urged the government to impose at least 50 per cent basic customs duty (BCD) on solar equipment with immediate effect to ensure domestic manufacturers’ survival.
AISIA said that Indian solar manufacturers had been struck with their exports witnessing a significant downfall due to coronavirus-prompted disruption. The BCD can give further impetus to the Prime Minister’s Vocal for Local movement and help the manufacturers strengthen their position in the domestic market.
However, import-dependent special economic zone (SEZ), are opposed to the levy of import duties as it would hurt buying of cells and modules from the SEZ units by those in the domestic tariff area.
Solar equipment makers have pointed out that solar factories in SEZs will have to shut down if the government levies a basic customs duty (BCD) on the import of solar cells and modules without providing a level-playing field to these manufacturing units. SEZs house around 43% module making units and 63% of cell making facilities.
If the BCD is imposed, those in the domestic tariff area who buy cells and modules from the SEZ units will have to pay the duty under the 2005 SEZ Act.
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