India’s finance ministry has approved the proposal of charging a basic customs duty (BCD) of 40 per cent and 25 per cent for the import of solar modules and cells, respectively, from April 1, 2022. The new BCD imposition comes just a few months after a one-year extension on safeguard duty was announced in July 2020. Thus, a duty of 14.9 per cent was applicable from July 30, 2020 to January 29, 2021, which would be reduced to 14.5 per cent from January 30, 2021 to July 29, 2021, for all solar cells and modules imported from China, Thailand and Vietnam.
The Indian government believes that the customs duties will help domestic manufacturers compete with regional rivals and avoid supply chain problems in the future. However, the move has been opposed by certain stakeholders as the imposition would raise costs for domestic solar manufacturers as well as project developers, raising energy costs, and hinder the achievement of the 175 GW renewable energy target by 2022.
With India targeting 280 GW of solar power capacity by 2030, a huge domestic demand is expected for solar cells and modules over the next decade. This creates a huge opportunity for local manufacturers, which can capitalise on technology advancements and production-linked incentives to make globally competitive solar products. However, the quality of solar modules needs attention so as to compete at a global level, especially with the increasing focus on cost efficiency.