Solar Association Asks Government to Defer Basic Customs Duty Imposition by 18 Months

Imposing two duties simultaneously on one product is not only unfair but also counterproductive, the letter said

September 1, 2020


The Solar Power Developer’s Association (SPDA) requested the central government to reconsider its decision of imposing Basic Custom Duty (BCD) on solar cells and modules and postpone its implementation by 18 months.

SPDA is an independent industry association that represents 50-member companies from the solar sector, which actively contribute more than 75% of total capacity operation in India.

According to the SPDA, Safeguard Duty (SGD) on cells and modules was recently extended by a year. Setting additional tariff barriers at this stage is not appropriate as it will damage the sector’s prospects, the association noted.

To ease the financial burden on projects that have been bid for (nearly 50 GW), the association has suggested waiting for 18 months before implementing the BCD. It claims that the safeguard duty has escalated capital costs, and additional duty will throw a spanner into the government’s plan of attaining 100 GW of installed solar power capacity by 2022.

According to the letter, levying basic customs duty will have a cascading effect as increased costs will result in higher power purchase cost for DISCOMs, translating into higher tariffs for different end-users.

“Imposing two duties simultaneously on one product is not only unfair but also counterproductive to achieving the target of 100 GW of solar power by 2022. Consumers must benefit from affordable and clean power possible through solar energy – the imposition of duties and taxes would have a cascading effect on power costs and could adversely affect the health of DISCOMs,” said Shekhar Dutt, Director General of SPDA.

BCD’s impact in solar manufacturing is already visible as their operating costs have shot up, impacting their global competitiveness. According to the association, basic customs duty can result in cartelization as demand for PV equipment remains higher than domestic manufacturing capacity.

The association has recommended indigenization of the upstream part of the value chain, i.e., polysilicon, ingots, and wafers, representing 30-35% of the total cost. As these are still being imported, the imposition of BCD makes matters worse.

The association has further suggested that instead of 100% duty on imports, only incremental imports should be taxed since incremental capacity will dwindle with an increase in domestic capacity.  Incremental capacity here refers to the modules uncatered by domestic manufacturers. This incremental capacity will taper down with an increase in domestic capacity. Additionally, more manufacturing linked tenders must be issued by the government to give a boost to domestic manufacturing in India, the association recommended.

Indian solar manufacturing capacity pales when compared to a manufacturing giant like China that currently has a manufacturing capacity that exceeds global demand. Recently, Mercom analyzed what it would take for India to ramp up its manufacturing capacity.

The government’s decision to impose BCD was expected this month, but the decision has still awaited. Mercom’s webinar today on “Indian Solar Market Update and Developments” will be discussing the topic of BCD imposition, among other pressing issues. The webinar starts at 11 am today, and you can attend by registering here.