India currently has solar modules manufacturing capacity of 7-8 gigawatts (GW). This includes the units of players like Adani Solar, Tata Solar, Waaree Energies, and Vikram Solar.

To incentivise domestic manufacturing of solar modules and cells, the government is planning to introduce a basic customs duty (BCD) on import of equipment for the sector. The idea is to start with a small duty and gradually raise it to 20%, so that local solar power developers, who rely a lot on imports from China, don’t take a big hit in the short term. 

The BCD introduction will be concurrent with the removal of the current safeguard duties on import of solar equipment from China and Malaysia in July this year. Anand Kumar, secretary, ministry of new and renewable energy (MNRE), told FE: “What we are contemplating is that the basic customs duty will be the right way to regulate the solar-sector (imports) on a long-term basis, since the safeguard duty is only a temporary measure.” Kumar added that his ministry was discussing with the ministry of finance how the BCD could be introduced in a gradual manner, “maybe 1-2% to start with” and then increase it up to 20% over a period of time.

In 2018, the government imposed safeguards duties on import of solar cells and modules from China and Malaysia for two years to arrest a sudden surge in imports from these countries. The duty was a near-prohibitive 25% in the first year, but came down to 20% for the next six months and then to 15%. The safeguard duties will go in July this year.

Industry sources feel the BCD will likely to be introduced next year to help the local manufacturers facing the double whammy of safeguard duty and now the slowdown due to Covid-19. The duty is likely to be increased to 10% in three years and to 20% in around 7-8 years, these sources say.

India currently has solar modules manufacturing capacity of 7-8 gigawatts (GW). This includes the units of players like Adani Solar, Tata Solar, Waaree Energies and Vikram Solar. As per the ministry of commerce data, in the last one-and-a-half years, since the safeguard duty was imposed, imports of solar cells and modules have fallen drastically. Imports of cells, which stood at $2.15 billion in 2018-19, have reduced to $1.4 billion in FY20, up to November. Cell imports had peaked at $3.83 billion in 2017-18.

“The safeguard duty has had a positive impact on Indian manufacturers of solar equipment as their share in total project installation increased to 25% in 2019 from 15% earlier. However, a major chunk of this was due to the order from Neyveli Lignite for its 1500 MW solar project,” said Jyoti Gulia, founder and director of Delhi-based advisory firm JMK Research. According to MNRE, India has a total 87.2 GW renewable energy capacity, while 55 GW is in the pipeline and another 33 GW is under bidding stage. Another 15 GW will be bid out before 2020.