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Implementation of basic customs duty on solar modules and its impact on the sector

Implementation of basic customs duty on solar modules and its impact on the sector

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The ongoing pandemic has a rippling effect across the world with businesses facing the maximum heat of the situation. With lockdown in place, units were forced to shut operations and demand for modules hit a low, resulting in a struggle for survival among the manufacturers. Though there have been growing conversations around the transition to renewable energy or the adoption of clean energy, the recent pandemic has had an adverse effect on the sector like any other. This has also put India’s potential to achieve the ambitious RE target of 175GW by 2022 in question. One of the major roadblocks in India’s adoption to clean energy is making distribution companies profitable, ease of business/installation or putting solar plants either on the ground or on the roof.

Due to decreased demands and exports out of question, the Indian solar module manufacturers have been facing a tough time sustaining themselves. The production has been higher as compared to the demands thus making it feasible and reasonable for the Indian market to procure from their local manufacturers. This poses as the perfect opportunity to create a level playing field for the Indian solar modules manufacturers and boost the segment by restricting foreign imports or implementing stringent duties, by creating an enabling environment for the sector.

As per reports by ORF, India has been one of the largest exporters of solar modules till 2011 but due to the lack of concrete policies and required support, it did witness a downfall as the country was not able to bridge the demand-supply gap. Though the proposal of 15 percent Safeguard Duty has been a positive step towards boosting the sector, it is still not adequate. To help the domestic manufacturers to grow exponentially and showcase their optimum potential, the government must consider implementing a minimum of 50 percent basic customs duty. This will encourage local players to produce the best-in-class products at competitive pricing, further catapulting R&D, employment and substantially contributing to the country’s economy.

India has always proven to be one of the largest markets in solar along with promising entrepreneurial skills, yet the country is lagging while competing with foreign players. We strongly believe that now is the time to bring the change by promoting locally manufactured modules and reinstating the country’s stature as one of the largest suppliers of superior quality modules by channelizing all energies towards improving manufacturing with regards to volume and cost management.

Since we lack the inflow of investment in core industries like infrastructure and raw materials, it automatically makes imports a much cheaper and viable option for the sector. Also, return on investment in manufacturing takes much longer, so an investor will look for 6 to 8 years of clarity in policies before investing. Today we have a large number of PPAs for which module of approx. 45000 to 50000 MW needs to be procured. However, all these can be imported from China under the grandfathering scheme while the local manufacturers have a clear disadvantage again diverting us from our mission of Atmanirbhar Bharat or self-reliant India.

Another key focus should be ALMM which was scheduled for announcement a year back relying on which investments were planned although the sudden withdrawal of the same disrupted massive investment opportunities thus hampering the confidence of the investors in the sector. It is also imperative for the government to incentivize domestic businesses to source their requirements from local players leading to the growth of the sector.

Though we need stringent policies in place at the earliest, we are certain that the implementation of the much needed basic customs duty and other measures will augur the development of the solar manufacturing industry in India powering the nation to not just meet its energy demands and achieve economies of scale but also penetrate into the global market and emerge as the epicenter of solar energy in the world.

The author of this article, Hitesh Doshi, is Chairman of All India Solar India Association

Anand Gupta Editor - EQ Int'l Media Network
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