Government Considers Withdrawal of Customs Duty Concession for Wind Turbine Parts

The government is expected to withdraw customs duty concessions for wind-turbine components to boost the use of local equipment and decrease imports from China and other countries.

The withdrawal is anticipated to start in April 2021 and may be phased out entirely in a year.

Unlike the solar energy sector, where about 90 per cent of the modules come from China, 80-85 per cent of wind-turbine manufacturing takes place in India. However, some vital parts for setting up wind power projects are imported, generally from China. The ministry of new and renewable energy is now pushing wind energy equipment makers to produce these parts locally.

“MNRE has examined which components are entering India and from where. Several rounds of discussions have been going on. It realized that most of the components are coming from China because it’s cost-competitive,” said sources.

Though talks on local manufacturing have been taking place between stakeholders and ministry officials for a while, discussions on removing customs duty concessions started lately after geopolitical issues between India and China.

The import duty levied on components differs widely and the removal of concessions will affect manufacturers to different degrees, provisional on what they buy and from where. With input costs going up, tariffs may also be affected.

The ministry has asked wind-turbine manufacturers to strengthen existing capabilities and sought feedback from them.

“The intent is to increase the present domestic manufacturing to 95 per cent,” the person said.

“When concessional customs duty was first permitted around 2003, our wind manufacturing base wasn’t as strong as it is today. But almost everything is being manufactured in India now,” the person said.

However, some see the move as a setback for the development of wind power, which forms the biggest chunk of India’s renewable energy sources.

“If more local production is set up here, it will increase the cost. Besides, China has the expertise and the skillset – it is not possible to do the same in India within two years,” said another person requesting anonymity. “It is not possible to do the same volumes here.”