Basic Customs Duty of 25% on Solar Cells and 40% on Modules to Take Effect from April 2022
There won’t be grandfathering of projects that are already auctioned
The Ministry of New and Renewable Energy (MNRE) has announced the basic customs duty (BCD) on imported solar cells and modules starting April 1, 2022.
The BCD on solar modules with HSN Code 85414012 will be 40%, and solar cells (85414011) is 25%.
The announcement to impose BCD on solar cells and modules does not allow grandfathering of projects already auctioned. The directive has also received the consent of the Ministry of Finance.
The ministry has also directed all implementing agencies and stakeholders to make a note of the announcement and include it in the tender documents. Bidders are cautioned to take the BCD into account while quoting tariffs in all future bids where the last date of bid submission falls after this notification.
In all such bids, the imposition of BCD will not be considered as ‘change in law.’
The directive to implement BCD is part of the ‘Atmanirbhar Bharat’ initiative to support domestic manufacturing by making imports expensive through duties.
MNRE has been preparing for imposing the BCD since Budget 2020 was announced when the duty was proposed. In September 2020, MNRE issued a notification asking solar PV manufacturers and associations to provide the list of machinery and capital goods required for inclusion in List 19 for exemption from BCD.
But the plight of the manufacturing units in special economic zones (SEZs) is still under the cloud.
The domestic solar manufacturers believe that long-term BCD is crucial for the sector to flourish.
The Solar Energy Corporation of India (SECI) has been struggling to sign power sale agreements (PSA) with the distribution companies, especially after record low tariffs in the recent auctions. Regardless of the reasons behind the low tariffs, distribution companies are delaying the signing of PSAs, hoping the tariffs would be as low if not lower in the future. This has left higher tariffs in previous auctions (19 GW) with no takers. Now that the future bids have to consider the BCD, tariffs are bound to go up.
The announcement has given ample time for the industry to prepare.
Mercom’s flagship event Mercom India Solar Summit, to be held virtually on April 8th and 9th, has an exclusive session to discuss ‘Solar Modules to Make or Not to Make in India?’. You can click here to register for the event. The discussion will revolve around how project developers and manufacturers are handling all the cost pressures resulting out of new duties among other challenges.