MNRE Clarifies No Plan To Cut Import Duty On Solar Panels

Highlights :

  • Notwithstanding the quick government denial, there is no doubt that a reduction in duties is an issue on the agenda, which the MNRE has resisted so far.
  • A duty reduction is likely to be seen as a major betrayal by module manufacturers who have invested in expanding capacities on the basis of the higher protection from imports.
MNRE Clarifies No Plan To Cut Import Duty On Solar Panels

Following news reports that the government plans to cut import duty on solar panels, the Ministry of New and Renewable Energy (MNRE) has seen it fit to clarify that no such plans are in the offing.

The news reports, carried by news agency Reuters as well as many Indian news outlets, had claimed that the government was planning to cut the duty on solar panel import to 20 percent from the existing 40 percent. However, no mention was made of the import duty on solar cells, at 25%. The reports also talked about a rollback on GST on solar devices, something that seems even more improbable.

The move was allegedly afoot due to a gap of 9-10 GW in demand that could not be met from domestic sources. It’s worth noting that domestic capacity has ramped up significantly in India and is currently estimated at between 24 to 30 GW. Plans in the pipeline linked to the government-sponsored PLI (Performance Linked Incentive) scheme and independent expansions have ensured that this capacity could touch 50 GW or higher by 2025-26.

In the market currently, there is definitely a shortage of high-quality modules, especially at the right price, as many developers claim that Indian manufacturers have still not fully passed on the benefit of the fall in raw materials in the past 3-6 months.

The government, on its part, has already exempted ALMM conditions by a year for now to support the same developers who want to import from China and other regions. Readers will be aware that the ALMM (Approved List of Module Manufacturers) condition mandates the use of modules only from manufacturers in the list, which currently has exclusively Indian manufacturers. R.K. Singh, Power and MNRE Minister, has repeatedly gone on record to say that the list is being used as a non-tariff barrier to nurture domestic industry by the government.

The government faces a tough situation in trying to balance out the demands of domestic manufacturers who want a strong local market to invest in manufacturing and developers who would rather import to deliver power at lower prices and keep their projects viable.

Multiple auction bids won since 2019 at very low prices by developers have been embroiled in successive issues, be it Covid disruptions in 2020-22, changes in GST norms, and volatility in international prices that have sent many calculations for a toss. In fact, anything between 6 to 12 GW of projects are considered under threat of being cancelled or further delayed if prices stay high.

Developers have already filed for cancellation of over 2.5 GW worth of solar projects in the past two years, citing various reasons.
With Chinese panel prices finally trending towards 25 cents/watt or lower from the 30 cents per watt and higher that ruled barely six months ago, developers finally see a chance to achieve closure for these projects.

What has complicated the issue is the low availability of even Chinese imports, thanks to strong domestic demand in China itself and their focus on other, more profitable markets in Europe and the US. The issue of margins has plagued them in India, too, as the top Indian manufacturers have been happy to export to Europe and the US rather than sell locally.

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