NEW DELHI: The Centre’s decision to implement a basic customs duty (BCD) on solar equipment imports has caused substantial consternation among a large group of domestic solar gear manufacturers. Some of these say that if the proposal is implemented in the current form, it may lead to the destruction of much of India’s local manufacturing capacity in the area — the exact opposite of what the government intends to do.
According to the power ministry’s proposal, the government will levy a BCD of 15-20 per cent on solar gear in an effort to discourage solar equipment imports, most of which originates from China. This has put Indian solar gear makers located in special economic zones (SEZ) in a bit of a spot, primarily due to the way the law is structured.
Companies working out of these zones benefit from a large variety of incentives and reduced levies. But, SEZs had been envisaged as means of nurturing India’s exports. When it comes to selling goods inside India, the law essentially treats goods shipped from these special zones as imports. Section 30 of SEZ Act mandates the imposition of the applicable BCD on all such products.
Around 63 per cent of India’s solar cell manufacturing capacity and 43 per cent of module capacity is estimated to be concentrated in SEZs. In normal times, the system levels the playing field between SEZ-based units and others in the local market. But, the large BCD hike may be well beyond what SEZ-based players can cough up without throwing in the towel, they say. According to sources, the Centre is
contemplating an equalisation levy of 1-2 per cent for SEZ units, instead of the full BCD, to fix this imbalance.
“In the absence of a level playing field, domestic manufacturers in SEZs will have to shut shop and may see job losses in tune of 15,000 people,” Vikram Solar’s Chief Executive Officer Saibaba Vutukuri; Avinash Hiranandani, Global CEO and Managing Director, RenewSys; and S L Agarwal, Managing Director, Webel Solar, had said in a joint statement last week.
Why the levy?
Equalisation levy of 1-2 per cent for SEZ will ensure that the manufacturing units located in the domestic tariff area (DTA) and SEZ are placed on similar footing in terms of custom duties,” say Vikram Solar’s CEO.