Talks on to allow older solar units exemption from duty

The Ministry of New and Renewable Energy is again in talks with the finance ministry for giving 'grandfathering' benefits to solar power projects that were bid out before customs duty was announced on modules and cells in March 2021.

The latest discussion may allow projects of around 26 GW capacity an exemption from the levy to import solar modules and cells, a senior government official told ET.

The imposition of a 40% basic customs duty (BCD) duty on solar modules and 25% on solar cells came into effect in April 2022, but the announcement to impose the duties was made in March 2021. The duty is levied to protect and encourage domestic manufacturing.


No relief was given to any projects after the duties were announced.

The industry has said this would slow down solar power development till the time adequate domestic equipment supply is available, apart from causing an increase in solar tariffs.

"They have a genuine problem, so we are seeing if grandfathering can be done," the official said. "We had tried this earlier, and we are trying again."

Such projects have been allowed to pass on the higher costs through an increase in tariffs, under a notification in September 2022. But, according to the industry, this is only a marginal relief.

"But in change in law, there are many agencies and steps like going to state regulators. So, it is not 'ease of doing business'. We are trying to give them the benefit in one go," the official said.

Besides, any increase in tariff would make these projects unattractive and may lead to the cancellation of existing power purchase agreements, according to industry experts.

"We have been advocating for 'grandfathering' as it is the best solution. We hope that as soon as possible it should be clarified, and the uncertainty is resolved," National Solar Energy Federation of India chief executive Subrahmanyam Pulipaka told ET.

The renewable energy ministry has allowed an extension for the deadline to complete the solar projects that were impacted because of the delay in import of panels and cells.

India is the world's third largest producer of renewable energy, with 42.25% of its installed power capacity coming from non-fossil fuel sources. The country is aiming to take its non-fossil electricity generation capacity to 500 GW by 2030.