Companies involved in solar energy have expressed shock at the government’s sudden removal of solar from “project import regulations,” which gave products intended for projects with discounted customs tariffs. In accordance with its previously stated aim, the Center introduced basic customs duties of 40% (plus a 10% social welfare surcharge) on imported solar modules and 25% (+SWS) on imported solar cells beginning on April 1, 2022. This was done in order to protect the new domestic solar manufacturing sector from the flood of imports.
Over 90% of the solar modules and cells (cells converted into modules) imported into India were made in China. Companies were able to take advantage of a 7.5% duty exemption on imported modules under the Project Import Regulations. With effect from October 20, the Ministry of Finance excluded “solar” from the scope of the Project Import Regulations by means of a notification that was issued on October 19. The language of the rules was changed to read “all power plants and transmission projects” instead of “all power plants and transmission projects other than solar power plants or solar power projects” to achieve this.
The sudden¬ness of the move has upset solar project developers. This action will adversely affect the profitability of about 10GW of solar projects. ReNew Power, Ayaana, Fortum, Tata Power, Acme, Avaada, NTPC, and the Aditya Birla group’s projects will be impacted. The Ministry of Finance should have taken this action when the basic customs tax was introduced and the Solar developers avail concessional duty benefits under the ‘project import regulation’
The source highlighted that there was never a “sunset” condition or deadline for solar projects to register, import goods, or finish their projects in order to qualify for the reduced duty benefits. Many developers’ projects will become unviable since they based their business decisions on this benefit but did not place purchase orders. The government seems to have noticed its error on the spot and quickly fixed it, but several firms are damaged in the process. What’s worse, some companies with a good ear to the ground predicted it and rushed to register their projects, leaving others holding empty bags.