Solar Imports to become Costly starting next year

In order to save its domestic manufacturing, the Indian government has once again decided to impose 40% basic customs duty (BCD) on imported solar modules and 25% on solar cells from 1 April 2022. The intent is to make imports more expensive and encourage manufacturing in India. This customs duty will replace the 15% safeguard duty currently imposed on Chinese and Malaysian imports.

There will be no grandfathering of power projects that are already bid out as the government is granting one-year’s time to developers to help them secure the required raw materials in time. The government is leaving no stone unturned to strengthen India’s manufacturing. The decision to impose BCD comes after the government’s PLI scheme to boost solar equipment manufacturing facilities.

India is heavily reliant on solar imports from neighboring countries especially China. India’s rising imports had prompted the government to impose safeguard duties in the first place. The Centre had imposed a 25% safeguard duty on solar imports from China and Malaysia in July 2018 for two years, which was extended to July 2021, at a rate of 15%. The BCD move will further discourage local players to import and focus more on locally made solar cells and panels. Solar energy is gaining heavy traction in India with improving fundamentals, awareness, and pricing. Given India’s rising power needs and huge solar target, the country needs to develop domestic solar manufacturing capacities making India more “Atmanirbhar“. It will not only promote domestic manufacturing but also increase the country’s export potential.