Central government to help domestic solar industry after sharp duty hike

The Centre may soon announce several incentives for the domestic solar industry to ease the pressure due to high import duties on solar modules and cells. It will, however, not be in the form of tax cuts, a report in Mint stated. 

The government may provide direct incentives to the producers of solar modules as it believes that tax cuts may lead to practical difficulties. Also, it may set a precedent for more sectors asking for tax breaks, the report added. 

The government announced a 40 per cent basic customs duty (BCD) on solar modules in 2021 and 25 per cent BCD on solar cells. These came into effect on April 1, 2022. A social welfare surcharge was also levied on the modules, taking the total to 44 per cent. It was primarily aimed at discouraging imports from China. 

However, the industry said that it might derail India's plans of installing solar projects as the cost of solar projects shot up after the taxes were announced. The cost of manufacturing solar modules makes up to 60 per cent of the total cost of a solar project, the Mint report added. 

To ease the pains of the industry, the government, in Budget 2022, had allocated Rs 19,500 crore for the solar modules under the production-linked incentive scheme. Along with Rs 4,500 crore allocated previously, the total outlay of the PLI scheme for solar modules went up to Rs 24,000 crore. 

India has set an ambitious target of achieving 500 GW of renewable energy capacity by 2030. Out of this, 280 GW is expected to be solar alone. 

As of June 30, the solar power capacity in India stood at 57.7 GW, the report by Mint added. In the June 2022 quarter, 3.9 GW of solar capacity was added to the country. In the previous quarter, it stood at 3.3 GW.