NEW DELHI: Amidst mounting tensions between India and China, Power and renewable energy minister R K Singh on Thursday said that his ministry has proposed a 20-25 per cent basic customs duty (BCD) on solar modules from August this year and a 10-15 per cent BCD on solar cells in an effort to cut down on import dependence.
China is one of the largest sources of solar equipment for Indian solar projects and solar modules generally account for over 60 per cent of a project’s cost. According to the minister, these duty levels will be for the first year, after which the levies will be gradually increased to as much as 40 per cent. Singh made the announcement during a press conference, noting that this was being done specifically to discourage imports from China.
He added that the government will place a clear trajectory for the duty increases to make sure there was no uncertainty in the policy. The new BCD will be imposed after the earlier safeguard duty of 15 per cent on solar cells and modules lapses at end of July this year. This duty had been imposed in July 2018 in an effort to protect domestic manufacturers from the sharp rise in imports from China and Malaysia for a two-year term.
The sheer dependence of the sector on Chinese products may make the duty increases costly for solar power projects, say to experts. India imports over 85 per cent of its solar equipment requirements, with around $1.18 billion worth of modules and cells imported from China in FY20 as of December 31, 2019.
Meanwhile, ratings agency ICRA in a report said that the lack of scale and backward integration in the domestic manufacturing process is likely to pose constraints on the government’s plans to increase local solar equipment manufacturing.