Solar equipment makers have pointed out that local solar factories in SEZs will have to shut down if the government levies a basic customs duty (BCD) on the import of solar cells and modules without providing a level-playing field to these manufacturing units. SEZs house around 43% module making units and 63% of cell making facilities.
If the BCD is imposed, those in the domestic tariff area who buy cells and modules from the SEZ units will have to pay the duty under the 2005 SEZ Act.
“In the absence of a level-playing field, domestic manufacturers in SEZs will have to shut shop and may see job losses to the tune of 15,000 people,” said Saibaba Vutukuri, CEO of Vikram Solar. To reduce Chinese imports, the Union government had imposed a 25% safeguard duty in July 2018 for two years (it has just been extended for another year to July 2021, at a rate of 15%). The government is also considering to impose a 20% BCD on solar imports; a final call on this is yet to be taken.
In order to provide a level-playing field, the government is planning to charge a 2% equalisation levy—in lieu of the incentives availed by SEZ manufacturers—on manufacturing facilities located in SEZs for transactions with domestic customers. However, industry players said that the progress on BCD imposition is happening at a faster rate than deliberations on the equalisation levy, contributing to uncertainties in the sector.
Avinash Hiranandani, CEO of RenewSys, said that with the government setting ambitious solar targets, the industry is willing to invest to expand the domestic manufacturing capacity but such decisions have been put on hold as manufacturers wait for the right policy signals from the government. “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 to 4 lakh jobs in the next 2-3 years,” Hiranandani added.
The safeguard duty on solar imports has produced mixed results – on one hand, market share of handful of Indian solar module suppliers has more than doubled to 30% in the two years to FY20 and on the other hand, the pace of solar power capacity addition in India has declined from 9.4 giga-watt (GW) in FY18 to 6.5 GW and 6.6 GW in FY19 and FY20, respectively.
