India plans to establish a 750MW solar power plant that would support the local industry by reducing the dependency on imported solar, which generated voices amongst local Indian manufacturers, where the All India Solar Industries Association (AISIA) hopes that government will not only elevate the duty on solar, but also impose a basic customs duty (BCD) of at least 50% for solar equipment.
As commented by AISIA, the COVID-19 pandemic has induced significant impact on exports for Indian solar manufacturers, and the increase in BCD will help with reinforcing the market position of domestic Indian solar manufacturers, aside from further responding to the “Made in India” policy proposed by the Prime Minister Narendra Modi. The custom duty of India includes the basic tax, supplementary tax, additional tax, educational tax, and safeguard duty, where the basic tax is imposed based on the approval by the Indian National Congress in accordance with commodity values or specific tax rates.
India is essentially a country of high duty. As indicated by the WTO during 2017, the average bound rate for India was 48.5%, and the simple MFN average applied rate was 13.5%, which means that the average duty of India has surpassed that of developing countries such as China, Russia, Brazil, and Vietnam. Although countries in the Association of Southeast Asian Nations (ASEAN) are marching towards the target of 5% average duty, the Government of India has yet to adjust the duty systematically.
Hence, another increase in the basic customs duty of solar products will lead to immeasurable cost in imported solar, which further escalates the cost of development. After all, India will be extending the safeguard duty on solar for another year upon its expiration, and imposing a 14.9% safeguard duty on solar products from China, Vietnam, and Thailand between July 30th 2020 and January 28th 2021, then a 14.5% safeguard duty from July 29th 2021 onwards.
Hitesh Doshi, Chaiman of AISIA, commented that the government needs to reconsider the requirements in the survival of Indian manufacturers, such as the implementation of a 50% BCD, and an approved list of qualified solar module and cell manufacturers. As pointed out by Doshi, neither pass-through benefits nor the grandfather clause guided developers to adopt locally produced modules, thus India will be importing approximately 45,000MW of solar modules for the 32,000MW power purchase agreement (PPA).
As expressed by AISIA, India has imported solar equipment worth roughly US$1.3 billion from China during the 2020 fiscal year, and a transition to adopting locally produced modules will be able to increase several thousands of job opportunities, as well as conserve cost. However, an increase of duty will also lead to an elevation in the cost of solar development for India, since solar panels from countries like China and Vietnam are significantly cheaper, which is the reason for local developers in using imported modules.
(Cover photo source: Flickr/JR CC BY 2.0)