New India solar custom duty details emerge but doubts over impact remain

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India's power minister RK Singh. Ministry of New and Renewable Energy GODL India.

Solar module imports into India face customs duties of as much as 40% by next year under plans outlined by the government, an apparent escalation of details released earlier this week.

Reports earlier this week suggested a 20% basic customs duty (BCD) would be introduced from August this year, replacing safeguard duties of 15% which are due to expire in late July. The safeguard duties had been in place to protect India’s local solar manufacturing industry.

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But new details have now emerged. In fresh comments reported widely by local media yesterday, India’s minister for new and renewable energy, RK Singh, revealed further details on the proposed duties, which would particularly affect Chinese imports.

Chinese products account for a large proportion of the equipment used in Indian solar projects, but following the deterioration of relations between the two countries in recent weeks, pressure has been mounting on the Indian government to break its dependence on China in key areas such as energy provision.

According to details outlined to reporters yesterday, Singh said a basic duty of 20-25% would be imposed on module imports from August this year, rising to 40% next year.

On solar cells, a BCD of 15% would be imposed, rising to 30-40% next year. Inverters will also be subjected to duties, with the proposed rate set at 20% from August.

Consultancy Bridge to India said in a briefing note on the proposed duties that they would lead to “limited” investment in India-based manufacturing, helping tide over the cost disadvantage of manufacturing in India. The organisation said Adana, Tata Power, Vikram and Waaree were the most obvious candidates for expansion among local manufacturers, with other companies looking to establish joint ventures with Chinese companies to meet local demand.

As for whether India will become a manufacturer superpower, Bridge to India said: “Sadly, no.”

“BCD alone is not going to cut it. The Chinese players dominate solar manufacturing through substantial investments in scale, R&D and value chain control. Indian companies have mammoth capability gaps and would continue to rely heavily on Chinese suppliers… Moreover, with the economy weakening and banks not keen to lend, financing would be a major hurdle.”

In an interview as part of the BNEF Summit New Delhi online conference broadcast today, but recorded earlier this week, before yesterday’s press conference, Singh sent out a message to solar manufacturers that India was open for business.

“I think this is a place to invest; we will have a market, which we will protect by basic customs duties, so come and manufacture here,” he said.

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