Last week an office memorandum of the Ministry of New & Renewable Energy (MNRE) said that the government has approved a proposal for imposition of Basic Customs Duty on solar photovoltaic cells and modules/panels.
It proposed Customs duty of 40 per cent on solar modules and 25 per cent on solar cells beginning April 2022. This should create a level-playing field for local manufacturers vis-a-vis foreign players and help achieve the goal of Atmanirbhar Bharat.
“India has all the capabilities needed to emerge as the next manufacturing hub,” says Shekhar Dutt. Director General, Solar Power Developers Association.
But it may not be this simple. And, here is why?
Scaling up manufacturing will take time, anywhere between 3-5 years, and in that period sourcing equipment would be through imports, which will become expensive. As modules are a major component, import duty will have a sizeable impact on the solar project cost. Since it is a pass-through in the electricity sector, this would also mean increase in consumer tariff.
Agreed, a broad range of factors affect tariff, but guesstimates show that this move can potentially lead to 50-55 paise increase per unit.