NEW DELHI: Domestic solar equipment manufacturers have criticised a Power Ministry proposal to exempt solar projects from the new basic customs duty (BCD) on solar gear imports, as long they have signed power purchase agreements (PPA) before the tax takes effect in August. The Ministry of New and Renewable Energy’s decision last week had come as a relief to solar developers since almost 80 per cent of project components are imported from China and the new import duty on such shipments would have resulted in significantly higher costs.
However, power minister R K Singh had told industry leaders last week that projects that had signed PPAs before August 1 will be allowed a pass-through of the additional duty — effectively making them exempt from the import duty of 20-25 per cent on solar modules and 15 per cent on solar cells set to be imposed from August 1. These duties are likely to be increased to as much as 40 per cent gradually. The pass-through needs to be approved by the finance ministry, but sources say that the MNRE may reimburse these developers the added cost of the duty even if the proposal is shot down.
While the power ministry’s decision will save substantial costs for solar project developers, domestic manufacturers have pointed out that this will only increase power tariffs across the board in these projects. It also does little to incentives the exempted developers to source equipment from Indian manufacturers. According to Hitesh Doshi, chairman of the All India Solar Industries Association, nearly 25 GW worth of contracts are likely to be exempted from the customs duty if the pass-through is allowed for imports from China.
