Relief for solar producers as govt reverses decision on import duty

India has scrapped a duty on solar modules, making it easier to import the products after a sudden change in customs policy last year led to a logjam of shipments at Indian ports.

Several consignments of solar modules, worth more than $150 million in total, were held up for more than three months at ports after Indian customs' officials in August demanded that some of them be classified as "electric motors and generators", carrying a 7.5 per cent import duty. Previously they were subject to no duty.

The finance ministry reversed the policy last month, stating in a notice seen by Reuters that most solar modules should revert to their original classification and that no tax should be levied on them.

Indian component makers have struggled to compete with Chinese companies such as Trina Solar and Yingli and have sought anti-dumping duties as well as long-term safeguards.

But the logjam of shipments at ports posed a headache for solar power producers and threatened to delay Prime Minister Narendra Modi's plan of nearly tripling the country's total renewable energy capacity to 175 gigawatt (GW) by 2022.

The plan has spurred foreign investment in the sector, with Japan's SoftBank and Goldman Sachs among others investing in solar projects in India.

Any duty is bad news for solar power producers such as SoftBank-backed SB Energy but good for local solar component makers such as Indosolar and Moser Baer.

The change in policy last August led to logjams as it was not immediately clear which modules belonged to the new classification. To ease the situation customs officials agreed to release shipments if importers paid a bank guarantee to cover any duty they may be required to pay.

An executive at the Indian unit of Germany's Enerparc, which had 30 of its containers stuck at the port of Chennai, said there was still some uncertainty about the process even though the duty had been scrapped. "Looks like it will take a month before we get our money (bank guarantees) back, but we are happy that the issue has been resolved," Enerparc's Managing Director Santosh Khatelsal said.

Customs officials were not available for comment outside of regular business hours.