According to government officials, India might exempt some solar projects from the equipment import duty to lower power tariffs and speed up the implementation of renewable energy projects. As per the sources, solar power projects with a total capacity of 30GW will benefit from the move.
The Indian government announced a basic customs duty of 25% on solar cells and 40% on solar modules in March 2021. The policy which came into effect on April 2022, was introduced to block the import of Chinese modules and create a manufacturing ecosystem in the country.
The finance ministry is considering waiving the duty for the projects that were awarded on a tariff-based model before the announcement on March 9th, 2021. This exemption might get announced in the February 2023 budget.
As per the National Solar Energy Federation of India (NSEFI), solar power projects with a cumulative capacity of at least 30 GW have been delayed due to the rise in the cost of solar cells and modules. Many developers had quoted ‘aggressively low tariff’ to win project bids in 2020-21 auctions.
Since almost 90% of the equipment required for the solar industry is imported from China, the addition of customs duties has become a major obstacle for projects.
From 27-28 cents per watt three ago, imported module price has gone up to 40 cents per watt. In comparison, domestic modules that are priced at around 37-38 cents do not provide much relief.
The government has allocated ₹19,500 crore Production Linked Incentive (PLI) scheme to boost the production of solar modules in India. Nevertheless, it will take some time before this measure yields tangible results. The exemption of duties on imports of solar equipment meanwhile, will help accelerate the installation of renewable energy projects and bring the capacity additions back on schedule.
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Resource: Reuters
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