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India mulls over raising solar tariff to 30% in 2023

Source:PV Men

Minister Raj Kumar Singh of the Ministry of New and Renewable Energy (MNRE) proposed recently that the Ministry of Finance levy the Basic Customs Duty (BCD) on imported solar cells and modules so as to boost the Indian manufacturing under Make in India initiative, according to a source familiar with the event.

“The BCD should be increased every year in different phases from April 1, 2021 to Dec. 31, 2023,” the letter reads, “the duty should be levied at 10% on solar module imports from April 1, 2021 onward; raised to 20% from Jan. 1, 2022, and 30% from 2023. Starting from Jan. 1, 2022, 15% should be imposed on solar cell imports, and scaled up to 30% in Jan. 1, 2023.”

To promote Made in India, Minister Singh also suggested that raw materials used for PV manufacturing, such as wafers, EVA, PV glass, silver paste, and aluminum frames, should be temporarily exempted from the duty.

India safeguard_BCD

India safeguard_BCD

Like European countries and the U.S., India depends heavily on Chinese solar PV components. Yet, things have changed since July 2018, when the country, inspired by Made in India promoted by Modi’s administration, imposed a 25% safeguard duty on solar imports for two years.

Since some countries imposed additional duties as a mechanism to protect domestic manufacturing in 2010, the PV industry has seen setbacks and unpredictability over and over and trade relations have undergone several changes. The march of free trade and globalization meets headwinds from many different directions.

The Indian manufacturing sector has structural problems, not only with PV but also a handful of other technologies of energy. It is doubtful whether these energy commodities can ever mature in the short term even after the BCD is imposed.

The safeguard duty rate announced in July 2018

2018 India safeguard

India’s safeguard duty has come down to 20% this year, and the government is expected to adopt measures in August 2020 to invigorate its manufacturing in PV sector given module imports still occupy 90% of the Indian PV market one year after the 25% duty was imposed, according to Bridge to India, a consultancy provider that tracks the development of India’s renewables industry.

Local developers have increasingly switched to imports from countries such as Vietnam, Singapore, and Thailand, rather than procuring components at home. With the domestic PV market dominated by cheaper imports, Indian producers are shifting their focus to least developed and emerging markets overseas.

Clearly, the safeguard duty does not provide much of help for the Indian government to manipulate the Indian PV market—but dismantling such a trade barrier could boost India’s PV capacity. Following the EU’s termination of the MIP last year, Europe’s PV capacity is forecast to grow by over 80% year-on-year in 2019.

At the end of the day, the imposition of anti-dumping and countervailing duties, the MIP, and the safeguard duty is an indication of the policymakers devoting more attention to the upstream side of the domestic PV industry than on the industry’s downstream side, where most stakeholders—end users, installers, developers, and EPC providers—argue that trade barriers put in place to protect the manufacturers at home make PV components more expensive and turn PV systems, which are handy, marketable, and affordable in their own right, into luxuries.

Obviously, Modi’s administration is unlikely to achieve the target of 100 GW of PV capacity by 2022 given only 28.2 GW of capacity was installed as of March this year.

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