India mulls customs duty delay or project deadline extension as manufacturing crisis bites

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The Indian renewables ministry will decide whether a delay to the customs duty or an extension of project deadlines would be effective. Image: Amp Energy India via Twitter.

The Indian government is reportedly either considering a delay to its customs duty on imported solar products or allowing domestic projects to push back deadlines in light of uncertainty from Chinese suppliers, the country’s renewable energy minister, RK Singh, told the Economic Times.

The decision comes after five of the solar industry’s leading module manufacturers issued a joint statement warning of an impending “crisis” regarding module supplies, imploring developers to consider delaying projects and calling for greater collaboration between upstream and downstream players. The price of modules jumped 9% in that same week.

“We have received a demand saying there is this problem [Chinese companies delaying supplies by invoking force majeure]. Of course, my orientation is ‘buy Indian’. But there are no sufficient stocks to buy Indian,” said Singh. “So, we are mulling over either timeline extension or duty extension. We haven’t taken any view.”

In March, India announced it will introduce a 40% basic customs duty (BCD) on solar modules as of April 2022 to cut the reliance on imports and expand the country’s PV manufacturing base.

Meanwhile, signed contracts for upcoming solar projects did not take the inflated module costs into account, meaning that the price rises will have to be borne by the companies alone.

As such, Indian developers have written to the India’s Ministry of New and Renewable Energy (MNRE) asking for a one-year extension on deadlines.

“The Chinese suppliers are taking advantage of this deadline and forcing Indian [independent power producers] to pay more than 1.5 times of original signed contract. Through this deadline we are only benefitting Chinese companies,” the letter said.

The Indian Solar Power Developers Association has also urged the MNRE to extend the BCD to protect Indian developers. It said a one-year extension would be a “win-win situation as domestic manufacturing will come up and Indian solar developers won’t have to depend on Chinese imports”.

India is keen to establish a domestic manufacturing base in the country, with Singh previously saying it was “unhealthy” for so much production to be located in China because of the threat of supply chain disruption.

In April, the MNRE established a production-linked incentive (PLI) programme that aimed to incentivise companies setting up integrated, higher capacity plants.

Currently, around 80% of India’s local demand for solar modules is met through imports from other Asian countries such as China, Vietnam and Malaysia and India has a target of adding 280GW of solar power installation by 2030.

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