Solar developers welcome customs duty although concerned about impact on ongoing projects

BENGALURU: The government’s move to promote indigenous equipment and impose customs duty on imports from August will help local industry develop but it will take up to two years to have an impact while ongoing projects that depend on foreign equipment may face hurdles, said industry executives and experts.

They were reacting to power and renewable energy minister RK Singh’s announcement of a series of measures for the renewable energy sector on Tuesday, including prior approval for essential imports and financial incentives for projects that use local equipment.

Policy measures to build self-reliance and safeguard supply security would be beneficial in the medium to long term, said Sujoy Ghosh, country head, First Solar India, a leading manufacturer of solar panels. “Given the scale of its solar programme and the need for supply security, India needs to evaluate alternatives to lower its current dependency on one particular country,” he said.

Since India is the third biggest solar market in the world, investments will surely follow but not immediately, said an industry executive. “In absence of tariffs, nobody would have invested in the supply chain in India because the Chinese will keep dumping. But it will take 18-24 months before credible alternatives get built,” said the executive, speaking on condition of anonymity.

Another solar developer expressed concern over the consequences basic customs duty (BCD) will have on projects that are in the process of being commissioned. “What will happen to those projects that assumed there won’t be any duty? They will now have to claim it back. This will lead to a lot of regulatory issues,” said the person, who did not wish to be identified.

Two years ago, India had introduced a ‘safeguard duty’ of 25% on solar panels and modules imported from China to try and help domestic industry compete better on price with their Chinese counterparts. The safeguard duty, valid for two years, is set to expire in July.

Most of the equipment in India’s solar industry is imported, with 85% of it coming from China.

The Ministry of New and Renewable Energy’s joint secretary Amitesh Kumar Sinha in a webinar earlier this month had said a basic customs duty will be imposed shortly after the safeguard duty expires. A 20% BCD was announced in the budget earlier this year.

The power ministry is preparing a list of “prior reference countries”, imports from which will require government permission.

It will also issue an approved list of models and manufacturers for the renewable energy industry, according to a statement issued by the power ministry on Tuesday. “This will ensure that all solar power projects which are bid out as per the standard bidding guidelines will be required to procure solar cells and modules and other equipment from manufacturers figuring in the approved list,” it said.


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