Even as the decision to impose basic custom duty on solar equipment is likely to boost domestic manufacturing, the move can be counter productive for manufacturers who have set up facilities in SEZs unless they are treated at par with units in the domestic tariff areas, industry players say.
Power and New & Renewable Energy Minister R K Singh on Thursday said his ministry has proposed to impose basic custom duty (BCD) from August 1, this year on solar equipment, including cells, modules and inverters, in the range of 15-20 per cent in the first year, which would eventually increase up to 40 per cent.
As per the data available with MNRE, 63 per cent or nearly 2000 MW out of the total 3100 MW of cell manufacturing capacity and nearly 43 per cent or around 3800 MW out of the 9000 MW of module manufacturing capacity is currently situated in SEZ.
“In general BCD imposition is a welcome move in the context that it is the time to focus on domestic manufacturing, which would help conserve substantial foreign exchange and create at least 3-4 lakh jobs in the sector in the next 2-3 years. However, this measure would be counter-productive and harm the very industry unless it is ensured that units in DTA and SEZ are placed on a similar footing in terms of duties and taxation,” Vikram Solar CEO Saibaba Vutukuri told PTI.
In July 2018, India imposed safeguard on solar cells imports from China and Malaysia for two years to protect domestic players from steep rise in the inbound shipments of the products. The government had imposed a 25 per cent SGD, which gradually came down over the years and would be zero or nil from July 30, 2020.
However, since the safeguard duty was applicable in the SEZ and export oriented units, solar equipment manufacturers in these units had to pay the duty for the modules and cells produced by them and utilized for solar projects in India.
“Apart from China, Malaysia and other countries, India is also a significant market for solar cells and modules for Indian firms, whether located in SEZ, export oriented units or DTA zones. No custom tariff was ever envisaged while investing into the manufacturing units in SEZ for clearance to DTA. It is thus important to protect the existing investment, especially in SEZ,” RenewSys Global CEO and MD Avinash Hiranandani said.
The ministry has proposed to impose 20 -25 per cent BCD on solar modules which would be raised up to 40 per cent subsequently in the second year. For cells, the duty would be in the range of 15-20 per cent in the first year and raised up to 40 per cent in the second year onwards.
Echoing the views, Webel Solar managing director SL Agarwal said, “If the manufacturing units located in DTA and SEZ are placed on similar footing in terms of custom duties and taxation, it will help India to achieve its renewable energy targets and help the government to achieve ‘make in India’ initiative. In addition, the manufacturing units located in SEZ would be able to export as well as cater to the domestic market, hence achieving economies of scale.