Energetica India nº91 July August 2020

energetica INDIA- July-Aug_2020 27 What will be the impact on the Indian solar industry if Ba- sic Customs Duty (BCD) be implemented on imports of solar equipments? P. Vinay Kumar, Varp Power With the revised rate of safeguard duty (SGD) which stands at 14.9 per cent for the next 6 months, the current duty structure is practically at the same level as the previous 15 per cent which lapsed on July 29, 2020. The Hon’ble power minister has indicated of imposition of a BCD of 20-25 per cent in Year 1 going upto 40 per cent in year 2. I presume that this BCD will be over and above the SGD. The total duty component will then rise to ~40 per cent in Year 1 and to 55-57 per cent in Year 2. By any standards this is significant and will impact solar tariffs in a big way. Theoretically, it will offer an opportu- nity and a formidable tariff wall for Indian solar manufacturers to ramp up production capacity and step into the vacuum. But as long as the change in law clause offers a pass through to developers in solar auctions of any increase in duties – no amount of taxation will change the purchase preference for imported modules. This makes it difficult to achieve policy objectives of ‘AtmaNirbhar Bharat’ for promotion of local man- ufacturing of solar cells and modules. Sanjeev Aggarwal, Amplus Solar The immediate impact of any additional duty imposition will be an increase in solar tariffs resulting from the increase in equipment prices, especially modules. It is hoped that in the longer term, import duties will lead to an increase in domestic manufacturing of solar equipment within India. The success, however, will be determined by our ability to invest in newer technologies as well as achieve backward integration while remaining cost-competitive. Manoj Gupta, Fortum India Pvt Ltd In addition to safeguard duty if BCD be implemented it will definitely increase the overall cost of the projects and solar tariffs will also go up. Ultimately developer has to bear the risk because if we talk about financing agencies as well, every - body wants assurance of return. Anil Joshi, Unicorn India Ventures The BCD on Solar module and Solar cell has been proposed to increase to 20-25 and 10-15 per cent respectively. It seems the objective is to promote domestic production or we can say Make in India or now AtmaNirbhar Bharat. While the move is good to increase the self-reliance but it will certainly increase the project cost and in some case loses to forward order as BCD will add on to the cost. The increase in cost may make some projects unviable due to increase in cost unless and until cost of production is brought at par with import options. In short term it will certainly impact existing projects. K. R. Harinarayan, U-Solar Clean Energy There is already a safeguard duty of nearly 15 per cent im- posed on solar modules and cells from China. Although, we have the capabilities to meet our solar module capacity within the nation, we still largely import solar cells from China (as there are only 3 - 4 established solar cell manufacturers in India). Imposing further customs duty on cells imported from China is counter-productive as Indian companies use these to develop their product, thereby affecting the cost of the mod- ule. Another scenario might arise, that is, in order to maintain cost viability, few Indian cell manufacturers would have the ability to create a monopoly in the market - which as we all know can be unsustainable for long term growth of the market. Shri Prakash Rai, Amp Energy India The government is planning to revive the Basic Customs Duty that has been under exemption since March 2005. There is still uncertainty on its imposition and now with the extension of SGD for another year, imposition of another duty would mean higher power cost to the end customer. It is imperative to un- derstand that any trade barrier in terms of duty or tax would be passed ultimately to the end consumer in terms of increase in cost of power. Any increase in power costs results in an increase in operating costs which decreases profitability and increases cost of end products. In such unprecedented times where profit margins are stressed out and everybody is trying to sail through, putting additional burden may not be the best move. Vikas Jain, Insolation Energy In general BCD imposition is a welcome move in the context that it is the time to focus on domestic manufacturing, which would help conserve substantial foreign exchange and create at least 3-4 lakh jobs in the sector in the next 2-3 years. This will also help India to achieve its renewable energy tar- gets and help the government to achieve ‘Make in India’ initia- tive. In addition, the manufacturing would be able to export as well as cater to the domestic market, hence achieving econo- mies of scale. Will ‘Grandfather clause’ be helpful in saving the industry? P. Vinay Kumar, Varp Power The change in law clause and the tariff reset adequately cover the risk of changes in taxation – for the developers. For the manufacturers of solar cells and modules though, it may make eminent sense to have a grandfathering clause for better pre- dictability. Manoj Gupta, Fortum India Pvt Ltd If we presume BCD comes in addition to SGD, for example in current scenario where approx 10 GW of projects are under FEATURE STORY