CHENNAI: Solar power producers are in a fix with over 1,000 containers of Chinese-made solar panels lying uncleared in Chennai following a dispute over Customs duty on them.
The bulk of solar panels, valued at about ₹500 crore, were imported through the Chennai port, and a few through Katupalli and Krishnapattinam ports. These panels were to be deployed in Telengana and Karnataka.
The dispute between importers and Customs department has been going on for three to four months. It started at Nhava Sheva port but the impact has been more at Chennai.
Solar panels attract zero per cent Customs duty. However, Customs have categorised solar panels as ‘electrical motors and generators’ that attract 7.5 per cent duty, which is being disputed by importers.
Sources said the department maintains that the panels can be used directly to produce electricity. However, importers argue that solar panels cannot be used directly, and that the power produced are sent to the power grid.
Most of the importers, including a number of small-time companies, ordered the solar panels in view of the subsidy given by the government. The 7.5 per cent Customs duty was not factored in while placing the order.
Sources said that 1 MW of solar power require about five FEUs (forty foot equivalent units) loads of solar panels.
Under the National Solar Mission approved by Union Cabinet on June 2015, the government has set a target for grid-connected solar power projects of nearly 100,000 MW by 2021-22. This necessitated bulk import of solar panels from China, sources said.
The misclassification of solar modules by port authorities has created confusion and delays in the sector.
Developers are facing extremely competitive solar auctions, which means returns are low and every penny counts. By misclassifying solar panels, Customs have further disrupted development of projects by delaying some projects by months and also adding to project costs, said Raj Prabhu, CEO, Mercom Capital Group, a global renewable energy consulting company.
Duty-free import provision
Till recently, solar modules were imported under a category that permitted duty-free import of “diodes, transistors and similar semiconductor devices; photosensitive semiconductor devices, including photovoltaic cells, whether or not assembled in modules or made up into panels, among others.
Indian solar industry has so far depended on imports, and change in Customs duty has created uncertainty and a possible hurdle for project developers, he said.