Net Zero Summit

Government must reconsider decision of imposing BCD on Solar cells and modules: SPDA

Solar Power Developers Association (SPDA) said that the Government must reconsider its decision of imposing Basic Custom Duty on Solar cells and modules. The Safeguard Duty on cells and modules has been extended by a year recently, hence setting additional tariff barriers at this stage is not appropriate as it will damage the sector’s prospects.

Therefore, SPDA recommends the imposition of BCD be postponed by 18 months so that financial burden on already bid out projects of capacity around 50 GWs can be avoided.

According to SPDA, Safeguard Duty has already resulted in an escalation in capital costs, and any additional duty can jeopardise the Government’s plan of having 100 GW of solar capacity by 2022.

The Basic Customs Duty has been under exemption since March 2005 to make Solar Power competitive and affordable for end-users.

The increased costs shall result in the higher power purchase cost for DISCOMs, translating into higher tariffs across different end-users.

The impact in the manufacturing sector’s case is particularly visible, as increased tariffs directly impact their operating costs that affect their competitiveness in the global market.

“Imposing two duties simultaneously on one product is not only unfair but also counterproductive to achieving the target of 100 GW of Solar Power by 2022. Consumers must benefit from affordable and clean power possible through Solar Energy – the imposition of duties and taxes would have a cascading effect on power costs and could adversely affect the health of DISCOMs,” DG SPDA Shekhar Dutt said.

There is a severe risk of cartelisation if BCD comes into force, but demand for Solar PV equipment continues to be higher than domestic manufacturing capacity.

While SPDA completely supports Govt’s efforts in promoting the domestic manufacturing of Solar PV equipment, it feels that a more comprehensive approach is needed.

Even with domestic manufacturing of cells and modules, upstream part of the value chain, i.e., polysilicon, ingots, and wafers, representing 30-35% of the total cost, will continue to be imported. Hence, the policy should target indigenisation of the entire value chain.

Further, instead of making duty applicable to 100% of imports, options must be explored to tax only incremental imports, i.e., the quantum of modules uncatered by domestic manufacturers.

This incremental capacity will taper down with an increase in domestic capacity. Additionally, more manufacturing linked tenders must be issued by the Government to give a boost to domestic manufacturing in India.

It must be acknowledged that building solar power plants and becoming power surplus is also a step toward self-reliance.

A real ‘Atmanirbhar Bharat’ would generate Solar Power in India using the equipment having the entire manufacturing value chain based locally.