India, the largest buyer of solar equipment from neighboring China, is considering a 7.5 percent tax on imported solar panels, according to government officials with knowledge of the situation.
Such imports aren’t taxed now, but might be reclassified as motors, which are subject to the tariff, the officials said, asking not to be named until a final decision was taken. The finance ministry is considering the renewable-energy ministry’s request to tax panels imported for projects won under future solar auctions while exempting those already awarded, they said.
The proposed change could imperil Prime Minister Narendra Modi’s ambitious goal of installing 100 gigawatts of solar energy by 2022, especially as developers have relied on low-cost equipment from China to push tariffs to among the lowest in the world. The South Asian nation bought a third of China’s $8 billion of shipments from January through September, according to BNEF research.
India is planning to offer financial incentives to boost domestic manufacturing and energy security, while probing if Chinese solar-equipment makers are hurting the domestic industry by dumping inventories and driving down prices to unfair levels.
Finance ministry spokesman D.S. Malik and renewable-energy ministry spokesman Rajesh Malhotra declined to comment.
Higher global module costs have already pushed up bid rates from record lows in auctions conducted by Solar Energy Corp. of India late last year and the import tax could increase prices further, according to Bloomberg New Energy Finance.
“Power producers need not panic immediately but they will still be nervous till a final notification comes from the finance ministry exempting import duties on projects that have already been auctioned,” said New Delhi-based BNEF India research head Shantanu Jaiswal.
Several solar projects faced delays and inflated costs last year after customs officials blocked more than 900 containers of panel shipments for more than a month by demanding higher import duties.