If from next year the cost of solar modules increases by 40% customs duty and 25% duty on cells, it will increase the cost of installation of PV modules in India.
As per the Care Rating analysts, there could be 20% hike in solar power tariffs after a basic customs duty goes into effect from April 1, 2022.
Till July 30, the safeguard duty on solar cell and module, which is imported from China, Thailand, and Vietnam, is 14.50%. While there is still no clear information about the safeguard duty, the Ministry of New and Renewable Energy has confirmed that the Ministry of Finance has approved the proposal to levy a 40% customs duty on solar modules, and 25% on cells, from April 2022. The solar electricity price in India dropped to an all-time low of INR 1.99 ($0.027)/kWh in a 500 MW Gujarat auction held in December.
The proposed basic customs duty structure will be applicable without grandfathering bid-out projects. Accordingly, scheduled projects that are not commissioned by March 31, 2022, would not be entitled to change-in-law compensation. This could directly impact the returns and debt-servicing capability of such projects, according to Care Ratings.
Projects scheduled for commissioning after April 1, 2022, will be eligible for change-in-law compensation, but this has always been a lengthy process. This will also increase power costs for off-takers.
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