Renewables ministry asks FinMin to impose customs duty on solar cells

The renewables ministry wants separate classification for solar PV cells and modules used for clean energy projects and levy duties on their import

Pushing the case for Make in India in solar equipment manufacturing, the Ministry of New and Renewable Energy (MNRE) has requested the Ministry of Finance to impose Customs duty on imported solar cells and modules in a graded manner from 2021.

This is the year when the safeguards duty levied on these items will expire.

As India is a signatory to the Information Technology Agreement (ITA-I), solar photovoltaic (PV) cells and modules are classified under Customs Tariff Head 8541 and exempt from Basic Customs Duty (BCD). 

The MNRE wants separate classification for solar PV cells and modules used for clean energy projects and levy duties on their import.

“Exemption for solar PV cells and modules/panels under ITA-I should be allowed if they are used in information technology. For any other use such as producing solar power, BCD may be levied in a phased manner to encourage Make in India,” said the letter by R K Singh, Union minister for power and MNRE. 

Business Standard has reviewed the letter. 

The MNRE has suggested a 10 per cent BCD on just solar cells, starting April 2021. For 2022, a 20 per cent duty on cells and 15 per cent on modules and 30 per cent on both from 2023 onwards. 

Solar PV cells/modules form 80 per cent of the cost of a solar power project. India’s solar power capacity of 81 Gw is built mostly on imported content, with more than 85 per cent sourced from China. 

“While a lot has been achieved on the capacity addition front, the bulk of our requirements for solar PV still continues to be imported. It has often (been) represented that one of the major impediments to the growth of the domestic solar PV manufacturing industry is the cheap import of solar PV cells and modules, in large quantities, without attracting any basic customs duty,” said Singh’s letter.

The request comes a month after domestic solar equipment manufacturers persuaded the government that they were ready to expand their manufacturing facilities if provided supply exclusivity. Solar cell manufacturing stands at 3 Gw. 

The industry in its representation said the short-term plan was to expand current cell manufacturing by 2.5 GW and to set up another 10 GW in coming by 2021. The industry plans to add 15 GW of module manufacturing by same year.

There is already an existing duty in imported solar equipment. In 2018, the Indian government announced imposition of safeguards duty on solar cells and modules for two years — 25 per cent in the first year, 20 per cent for six months, thereafter, and 15 per cent after that. The industry in a separate petition has asked the government to consider extending the duty beyond two years.

While the government is taking several steps to curb imports, the mega tender for solar manufacturing is repeatedly being cold shoulder by the industry — both domestic and foreign. The last date of submitting bid for the power plant linked solar manufacturing tender was extended for the twelfth time last week, as no bid came from any company. 

On Friday, the GST Council lowered the rate on evacuated tubes used in solar power-based devices like solar water heater and steam generation systems to 5 per cent.