Solar power projects that were awarded bids before the Basic Customs Duty (on solar cells and modules) got imposed, can now pass on the increased costs under the ‘change in law’ rule.

The MNRE states, “solar photovoltaic (PV)/solar PV-wind hybrid power projects wherein the last date of bid submission was on or before the announcement on March 9, 2021, the renewable energy implementing agencies can consider the imposition of BCD on import of solar cells and modules under ‘change in law’, unless disallowed under any specific provision of the tender document.”

A basic custom duty of 25% on the import of solar cells and 40% on the import of solar modules was imposed by the Ministry of New and Renewable Energy (MNRE) last year. The rule came into effect on 1st April 2022. This decision was made to improve the domestic manufacturing capacity of the country.

Moreover, the government increased the Goods and Service Tax (GST) on solar components and other renewable energy devices from 5% to 12% on September 30th, 2021. Projects bid on or before the date, are also provided an exemption from the price hike.

The decision comes at a time when many solar developers (including NTPC) are facing delays in project timelines and the inability to source domestic modules due to the policy change. According to reports, the new policies affected more than 20 GW of solar power capacity in the pipeline.

The Change in Law clause will allow developers to recover the increased cost incurred due to a change in state law or policy. In this case, the laws are the BCD and GST price hikes.

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Resource: The Economic Times

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