Modi’s first budget clears tax hurdles for India’s solar manufacturers

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Prime Minister Narendra Modi’s first budget has been delivered with a number of tax advantages for the solar industry revealed.

Excise duty will be waived on backsheets and “inputs used in their manufacture”, glass for modules, copper wire for cells and modules and “machinery and equipment required for setting up of a project for solar energy production”.

In addition, copper wire and backsheets will be exempt from customs duty while project equipment and machinery will benefit from a concessionary customs rate of 5%.

“We need to maximise our utilisation of solar power. The existing duty structure incentivises imports rather than domestic manufacture of solar photovoltaic cells and modules,” finance minister Arun Jaitley said in his budget statement.

The finance ministry is currently considering the imposition of recommended anti-dumping duties on Chinese, US, Taiwanese and Malaysian cells and modules.

Two ministers have warned the duties will stall project development but manufacturers have warned they are necessary if they are to survive financially beyond the end of the year.

A decision on the duties is due before the end of August.

Some funding for project development was also been announced in the budget. A sum of INR5 billion (US$83.5 million) has been set aside for large-scale project development in five states. Solar water pump installations will benefit from four billion rupees (US$66.8 million) and one billion rupees (US$16.7 million) will be used to install sub-1MW plants along the banks of canals.

The ministry for new and renewable energy (MNRE) has also confirmed that it is coordinating the development of 5GW and 2.5GW solar parks in Jammu & Kashmir (J&K).

A committee of state and central government officials has been formed to press the projects forward.

India’s solar parks cordon off grid-connected, pre-approved sites for the development of PV projects.

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