India to Bring a Customs Duty on Solar Cells and Panels to Promote “Make in India”

As India grapples with a rising trade deficit against China (more than $58 billion annually), the government has imposed import duties on a range of goods such as electronics, footwear, toys, etc. to stop the surging imports and promote domestic manufacturing. As the Indian economy continues to be in doldrums since consumption demand has fallen across the economy, the government wants to increase jobs and manufacturing which would lead to a revival in demand.

With Chinese imports pushing most small to large manufacturers to the brink, the duties are expected to make the domestic manufacturers more competitive with foreign players who have more or less killed a large section of the industry. Solar cells and panels will also see a 20% import duty being imposed soon which could replace the existing safeguard duty of 15% that is set to expire in July 2020. While this has raised the hackles of the solar developer community who fear a rise in prices, it has brought a smile to the domestic solar manufacturers who have been facing the onslaught of the Chinese and other SE Asian countries, who now account for almost 90% of the domestic demand from the solar energy sector. Also, read about the Indian BIS quality requirement for solar panels.

The import duty has been in the work but could not be implemented easily as solar cells and panels are classified as electronics imports as per the IT Act of 1997 under which the signatories are not allowed to impose duties on imports of electronic items under the Act. However, the government is going to bring a workaround by classifying solar cells and panels as energy generation devices rather than electronic devices. While India’s solar energy growth has been one of the success stories of the current NDA government, the objective of boosting domestic solar manufacturing and employment has not really worked out as cheap Chinese imports have pushed many of the companies such as Moser Baer, Indo Solar and others to bankruptcy. Others have also seen stifled growth. However, with the passage of the customs duty, Indian companies will now be able to invest with a sustainable demand in the view of the long term.