Government Keen on Removing Duty Concessions for Wind Turbine Parts

The government is looking to withdraw the customs duty concessions that are offered to wind power developers for importing wind turbine parts

Hot on the heels of the announcement that the safeguard duty (SGD) on Chinese origin solar equipment will be extended for another year, reports have surfaced that the government is now looking to withdraw the customs duty concessions that are offered to wind power developers for importing wind turbine equipment/ parts from China and other neighbouring countries.

The idea behind the move is to promote the use of local equipment for the development of the projects in the country, however, the outlying reason for the decisions could also be accredited to the ongoing tensions between the two neighbours at the Ladakh border.

It is worth noting that unlike the solar energy sector where about 90 percent of the modules come from China, a majority of the wind turbine manufacturing (around 85 percent) is actually local with manufacturers setting up local plants. However, some vital parts for setting up these projects are imported, mostly from China, and the Ministry of New and Renewable Energy (MNRE) is now expecting the new duty impositions to nudge wind energy equipment makers to produce these parts domestically.

The withdrawal is expected to start in April 2021 and may be phased out completely in a year.

According to a report by ET, the import duty imposed on components varies widely and the removal of concessions will affect manufacturers to different degrees, depending on what they buy and from where. With input costs going up, tariffs may also be affected. The ministry has asked wind-turbine manufacturers to strengthen existing capabilities and sought feedback from them.

With discussions still in the nascent stage, it is still unclear whether the withdrawal of concessions would be universally applicable or only for imports from China because the Indian market also has suppliers based in many other countries.

For the SGD on solar equipment, the government picked upon the recommendations of the DGTR (Directorate General of Trade Remedies) last week. The extension, till July 29, 2021, seeks to protect Indian manufacturers from alleged dumping by Chinese firms.  Interestingly, there is no mention of  Malaysia in the new notification, a country that was specifically included along with China in the previous run of SGD.

The new duty level is 14.9 percent on imports from July 30, 2020, to January 28, 2021, before it is reduced to 14.5 percent for the remaining period of six months. The duty applies only to solar modules and cells.