To curb imports of solar panels, the Ministry of New and Renewable Energy (MNRE) has proposed to levy 20-25% basic customs duty, Union power minister RK Singh said. For solar cells, the domestic manufacturing capacity of which is lower, the duty will be 15%, he added. The duty on panels will progressively be increased to 40%.
The duties are expected to be levied right after the safeguard duty regime on these products ends on July 31.
The levying of the duty is aimed at reducing imports from China, which continues to be the largest supplier of solar equipment to India even after imposition of the safeguard duty in July 2018.
The government in July 2018 had imposed a 25% safeguard duty on import of solar cells from China, Malaysia and developed countries.
Though the move is aimed at increasing reliance on domestic manufacturing, local factories located in SEZs — which houses around 63% cell manufacturing and 43% module manufacturing capacities — will also have to pay the duty under the 2005 SEZ Act if they do not get special exemption.
Welcoming the government’s plan, Saibaba Vutukuri, CEO of Vikram Solar, said, “It must take the necessary step to protect the investments already made by manufacturing facilities located in SEZ.”
Though gradually falling since the imposition of the safeguard duty, imports of solar cells and panels in April-December FY20 from China were worth $1.2 billion, while the total import of solar equipment during the period was $1.5 billion.
Imports of solar cells and modules in the first nine months of FY20 from Vietnam ($127.2 million) and Thailand ($110.4 million) were 842% and 1,352% higher, respectively, than what was procured in FY18, when there was no safeguard duty.
Overall imports of solar equipment also fell 60.2% between FY18 and April-December FY20, while imports from China declined 65.5% in the same period.
The country’s domestic manufacturing capacity stands at 11 GW for panels and 3 GW for cells, though about 50% of the capacity remain unutilised due to price and quality concerns. However, the gap between the landed cost of local product and its Chinese counterpart has gradually narrowed to about 1.5 cents per watt.