The Ministry of Finance’s proposed move to impose Basic Customs Duty (BCD) on solar manufacturers located within the Special Economic Zones (SEZs) is likely to impact the viability of these units, and hamper India’s ability to produce indigenously manufactured solar cells and modules
June 05, 2020. By News Bureau
Leading solar manufacturers, including Webel Solar, Vikram Solar and Renewsys have sought the intervention of Hon’ble Prime Minister Narendra Modi to provide a level-playing field to all manufacturing units in order to realize the true potential of the renewable energy sector under the Government’s ambitious Atma Nirbhar Bharat Abhiyan.
Terming the Prime Minister’s announcement last week as a path breaking initiative, the leading industry players said this is the time to focus and unleash the true potential of the sunrise sector. “However, we would like draw the attention of the honourable Prime Minister and the key decision makers to address certain policy hurdles that solar manufacturers are facing and create a level playing field to all in order to turn this dream into reality,” they said.
The Ministry of Finance’s proposed move to impose Basic Customs Duty (BCD) on solar manufacturers located within the Special Economic Zones (SEZs) is likely to impact the viability of these units, and hamper India’s ability to produce indigenously manufactured solar cells and modules.
The imposition of BCD will be detrimental for units located in the SEZs, as they will be liable to pay the customs duty on the value of solar modules whenever they clear the modules to Domestic Tariff Area (DTA), even if they are importing solar cells. For module manufacturers located in DTAs, they would be required to pay BCD on the value of cell, thereby putting them in an advantageous situation as compared to the manufacturers in the SEZs.
According to Saibaba Vutukuri, Chief Executive Officer, Vikram Solar, "India is planning to achieve an ambitious target of 100 GW of solar deployment by 2022 as a part of National Solar Mission. It is noteworthy that the 33 GW capacity of solar power deployment so far has been largely attained using imported solar cells and solar panels from China despite India having had enough module manufacturing capacity. Sadly, this has led to the closure of some of the manufacturing units due to very low capacity utilization. While India has been focusing on creating a market for solar power, now is the time to focus on domestic manufacturing, which would help conserve substantial foreign exchange and create at least 3,00,000 to 4,00,000 jobs in the next 2-3 years.”
Vutukuri, along with Avinash Hiranandani, Global CEO of Renewsys and Mr SL Agarwal, Managing Director of Webel Solar said the imposition of BCD will be detrimental for units located in the SEZs, In case BCD is levied, manufacturing units located to SEZs will get adversely affected as compared to their counterparts in Domestic Tariff Area (DTA) as manufacturing unit located in SEZ which would be liable to pay BCD even on value addition in addition to the BCD on the imported value, whenever they clear goods to DTA.
However, a manufacturing facility located in DTA would be liable to pay BCD only on imported value of goods and won’t be liable pay BCD on value addition done in DTA “For module manufacturers located in DTAs, they would be required to pay BCD on the value of cell, thereby putting them in an advantageous situation as compared to the manufacturers in the SEZs.”
With 63% cell manufacturing capacity and 43% module manufacturing facility located at the SEZs, solar manufacturers expressed concern that this measure would be counter-productive and harm the very industry for whose protection the measure is intended to be imposed. Therefore, if the Government plans to levy BCD, it must take the necessary step to protect the investments already made by the manufacturing facilities located in SEZ by taking up the matter with the concerned ministries to provide exemption ensure that a unit in DTA and SEZ are placed on a similar footing in terms of custom duties and taxation.
According to Hiranandani, it is no doubt that India has emerged as a strong market for solar power equipment in the last 5 years. With the Government setting ambitious targets of 175GW by year 2022, it is important to ensure a conducive environment in order to achieve it. “Apart from China, Malaysia and other countries, India is also a significant market for solar cells and modules for Indian firms, whether located in SEZ, EOU or DTA. No Custom Tariff was ever envisaged while investing into the manufacturing units in SEZ for clearance to DTA. It is thus important to protect the existing investment, especially in SEZ, by ensuring that in case SEZ units sell their products in DTA/Indian territory, they are liable to pay custom duties at par with the units in DTA and the custom duty implication on them is limited to an extent of benefits availed in terms of duties and taxes forgone, if any, whenever goods are cleared from SEZ to DTA and not beyond.”
Agarwal said by doing this, the government will ensure that the manufacturing units located in DTA and SEZ are placed on similar footing in terms of custom duties and taxation. This will help India to achieve its renewable energy targets and help the government to achieve “Make in India” initiative. In addition, the manufacturing units located in SEZ would be able to export as well as cater to domestic market, hence achieving economies of scale.
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