Webinar Insights: Impact of Basic Custom Duties (BCDs) on Indian Solar Sector
As India is bracing to achieve its target of 100 GW of solar energy by 2022, there are issues related to increasing import bills due to solar photovoltaics. India’s module and cell manufacturing remains below par when compared to its Chinese counterparts. In wake of promoting the domestic manufacturing, the government-imposed safeguard duty in July 2018 which is due to expire this month. The government now plans to impose basic custom duty (BCD) from August this year to further incentivize the domestic manufacturing industry.
JMK Research & Analytics with a view to broadcasting awareness and discussion on this subject, the firm organized a webinar titled “Impact of BCDs on Indian Solar Sector” on 3rd July 2020.
The webinar provided a platform for interactive discussion with 3 eminent speakers, namely,
1. Dr. Hitesh Doshi (Chairman, MD, Waaree Group)
2. Mr. Ramesh Nair (CEO, Adani Solar)
3. Mr. Parag Sharma (CEO, O2 Power)
Dr. Hitesh Doshi made the opening remark among the panelists. He welcomed the government’s move to impose BCD but was uncertain if 25% duty was sufficient for the industry to pick up. According to him, 25% duty is insufficient to counter “dumping” by Chinese firms that he said in the past few months alone had led to a 20-25% fall in the price of modules imported from China. He reiterated that duty of around 50% for longer period along with some more support system will bring investments into the manufacturing sector. On technology front, he was optimistic that Indian manufacturers have made their space in international markets. He asserted that India right now needs ALMM (Approved list of models and manufacturers) and pass through advantages that Chinese manufacturers are getting in India to achieve a total of 10 GW cell manufacturing and 25-30 GW of modules manufacturing in 2 years. He emphasized that anti- Chinese sentiments across the world can be a benefit for cell and module manufacturers to export (20-25%), as domestic demand will take time to pace up.
Mr. Ramesh Nair opined that the immediate effect of BCD imposition is not going to be visible in the coming 18 months. Also, the imposition needs to last longer for at least 10 years to let market grow and mature. He too was uncertain that to how long India would take to become competitive with China but reassured that with policy push and domestic demand, the process will gain traction. He also agreed with Dr. Doshi’s view that the 25% duty was “definitely not enough” and was “miniscule” at today’s panel prices, arguing that Chinese manufacturers would be able to sidestep such a small duty by lowering prices.
He was hopeful that in a span of 2 years at least 3-4 GW of additional cell manufacturing would come up very rapidly in the country. He dismissed the idea that there is quality issue with domestic manufacturing and reiterated there have been exports to countries like USA.
Mr. Parag Sharma shared his belief as a developer that domestic manufacturing today is not as competitive as its Chinese counterparts. A duty of about 40% will make more sense for a developer to prioritize domestic content over imports. Also, there is a lack of bankable domestic cell and module manufacturers. He remarked that the tariffs would rise with the imposition of duty and it is unlikely to achieve a tariff as low as Rs. 2.36/kWh in near future, for every 10% rise in BCD there is a subsequent rise of 10 paisa/kWh in tariff. He also pointed out that MNRE has clarified that there would be no retrospective effect of the duties that would be imposed. So, all the PPAs signed before the expiry of safeguard duty will be exempt from BCD.
The speakers agreed that the government intervention to impose BCD has been in the right direction to become “Self-Reliant” or “Atma Nirbhar” and this will send a signal to the domestic manufacturers to expand and trust the government’s intentions of providing smooth regulatory landscape and policy support.
Click here to listen to the webinar recording