The Ministry of New and Renewable Energy (MNRE) has declared that imports of solar cells and modules would be subject to a basic customs tax (BCD) beginning April 1, 2022.
Solar modules with HSN Code 85414012 will have a BCD of 40%, while solar cells (85414011) will have a BCD of 25%.
The announcement to levy BCD on solar cells and modules does not enable for the grandfathering of projects that have already been auctioned. The directive has also been approved by the Ministry of Finance. The ministry has also mandated that the notification be noted by all implementing agencies and stakeholders and included in the tender documents. Bidders are reminded to include the BCD when quoting rates in all future bids if the deadline for submission is after this notification.
The application of BCD will not be regarded a "change in legislation" in any of these bids. The BCD directive is part of the 'Atmanirbhar Bharat' strategy, which aims to boost indigenous industry by making imports more expensive through taxes. MNRE has been prepared to impose the BCD since the proposed duty was announced in Budget 2020. MNRE published a notification in September 2020, asking solar PV manufacturers and associations to offer a list of machinery and capital products required for inclusion in List 19 for exemption from BCD. However, the condition of manufacturing companies in special economic zones (SEZs) remains clouded. Long-term BCD, according to local solar manufacturers, is critical for the sector's growth.
The Solar Energy Corporation of India (SECI) has been difficult to establish power purchase agreements (PSA) with distribution companies, especially after the last auctions yielded record low pricing. Whatever the reasons for the low tariffs, distribution businesses are delaying the signing of PSAs in the hope that the tariffs will be as low, if not lower, in the future. This has resulted in no takers for increased pricing in prior auctions (19 GW). Tariffs are bound to rise now that future bids must take the BCD into account. The announcement has given the sector plenty of time to prepare.
According to industry association NIMMA, Finance Minister Nirmala Sitharaman has stated that basic custom tax on solar modules will be enforced on April 1, 2022, a move that will preserve domestic players from harsh price competition from imported modules.
On Thursday, a delegation from NIMMA, the Indian Solar Manufacturers Association, and the All India Solar Industries Association met with Sitharaman and expressed concerns about manufacturing units that are on the verge of closing due to the current duty-free window on solar panels and cells from China and other countries.
According to a NIMMA statement, the finance minister informed them that the BCD (Basic Custom Duty) will be introduced as planned on April 1, 2022.
The team also asked her to exempt the module and cell line plant and machinery from import duties, according to the statement.
"The conversation with the minister was encouraging since she recognised that the industry will need governmental support to flourish and reach its full potential."
The domestic manufacturing industry will benefit from the implementation of BCD. We hope that more initiatives to reduce supply-chain gaps are considered. Furthermore, this is the busiest season for developers to buy modules, so I urge them to promote the government's Atmanirbhar Bharat project and install Indian modules," said Manish Gupta, President of the North India Module Manufacturers Association (NIMMA).
According to Bharat Bhut, Cofounder and Director of Goldi Solar, a solar company, the decision is a benefit for Indian module manufacturers, who have faced tough pricing competition from imported modules.
Goldi Solar has also boosted its module manufacturing capacity to 2.5 GW, with ambitions to expand to 5 GW in order to meet the government's goal of becoming energy-independent through Made in India modules.
Manish Gupta, Vineet Mittal, Arpit Agarwal, Manish Agarwal, and Sandeep Gupta represented the solar associations in the delegation.
NIMMA was founded in October 2017 to promote solar PV module makers in India and to represent the concerns of small and medium-sized businesses in the field.
NIMMA aids its members in developing, promoting, and improving product and production standards, cooperative marketing strategies, and raising member issues with relevant authorities.
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