Though the government’s recent announcement of imposing a basic customs duty (BCD) on the import of solar panels intends to benefit the Make in India programme, industry players pointed that as long as the plant developers are allowed to passed through the increased costs by raising tariffs, domestic players would remain shunned as renewable energy companies would have no incentive to procure locally made equipment. Sector veterans said that even after a 25% safeguard duty on import of solar panels in July 2018, about 50% of the domestic manufacturing capacity currently remain unutilised.
The future of domestic solar manufacturers look more ominous because module prices globally are expected to trend further down amid weak demand post-pandemic, giving solar plant owners lesser reason to turn towards the local industry. Global module prices are consistently coming down and currently ranging at $0.17/watt power (wp) – almost half the early 2018 levels. Crisil Research estimates module prices to fall further to $0.14-0.16/wp by the end of FY21, led by the oversupply and fall in global demand.
“To help domestic manufacturers, 50% duty should be imposed immediately without a pass through given to developers,” Hitesh Doshi, chairman, all India Solar Industries Association, said. Union power minister RK Singh recently said that the government plans to levy 20-25% BCD on solar panels, and the duty on panels will progressively be increased to 40%. The BCD is expected to be levied right after the safeguard duty regime on these products ends on July 31. BCDs will also be a bane for local solar factories in SEZs — which house around 43% module manufacturing capacities — as they will also have to pay the duty under the 2005 SEZ Act if they do not get special exemption.
The safeguard duty on solar equipment import from China, Malaysia and developed countries currently stands at 15%. Though solar imports from China have gradually fallen since the imposition of the safeguard duty in July 2018, it still remained the largest source of solar cells and panels in April-February FY20 with imports worth $1.3 billion. Simultaneously, the pace of solar capacity addition has also decreased from 9.4 giga-watt (GW) in FY18 to 6.5 GW and 6.6 GW in FY19 and FY20, respectively.