Solar Developers Urge Govt to Postpone BCD Imposition on Cells, Modules by 18 Months

The move came as safeguard duty (SGD) on cells and modules has been extended by a year recently by the government after recommendation of DGTR. Hence, solar developers believe that it will increase the tariff and setting additional tariff barriers at this stage is not appropriate as it will damage the sector’s prospects.

August 28, 2020. By Manu Tayal

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Industry body Solar Power Developers Association (SPDA) has requested the Government to reconsider its decision of imposing Basic Customs Duty (BCD) on solar cells and modules.

SPDA is a national association representing India’s upcoming solar power generators and developers.

The move came as safeguard duty (SGD) on cells and modules has been extended by a year recently by the government after recommendation of DGTR.

Hence, solar developers believe that it will increase the tariff and setting additional tariff barriers at this stage is not appropriate as it will damage the sector’s prospects.

Therefore, the industry body has recommended 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.

As per SPDA, SGD 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.

Since March 2005, BCD has been under exemption 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, said the industry body.

It further said, 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.

Commenting on the development, Shekhar Dutt, DG, SPDA, said that “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.”

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, it added.

The solar power developers further said that, 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 per cent of the total cost, will continue to be imported. Hence, the policy should target indigenisation of the entire value chain.

It further suggested that, instead of making duty applicable to 100 per cent 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.

SPDA said that, 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.

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