The government is not likely to extend the basic customs duty on solar modules after the recently rolled out production linked incentive period gets over.

‘Competitive sector’

“The incentive scheme has not been given more than five years to push the industry to become competitive. Basic customs duty will not be extended even if the domestic modules are 5 per cent more expensive after the incentive period. Everyone wants to buy from India because of the unreliability of Chinese suppliers,” a Senior official told BusinessLine. Last week, the Ministry of New and Renewable Energy outlined the guidelines of the ₹4,500 crore incentive scheme.

The incentive will be doled out to eligible manufacturers over a period of five years from the scheduled commissioning of a plant. The scheme follows the announcement of a basic customs duty of 40 per cent and 25 per cent on imported modules and cells, respectively, from April next year.

Even after the incentive, domestic manufacturers may be unable to meet the growing demand from Indian developers. “The incentive and the duty are likely to improve the cost competitiveness of domestic manufacturers against imported modules by more than 10 per cent at the prevailing imported module prices,” ICRA said in a note on Monday.

Chinese module suppliers have pressed on Indian developers to revise existing contract terms citing higher prices of raw materials such as glass, a developer said, adding that “Chinese firms can renegotiate because they know we don’t have a domestic manufacturing industry to fall back on.”

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