SPDA Makes a Case for 18 Month Deferment of BCD On Solar Equipment

Just a week after the manufacturers association, the All India Solar Industries Association (AISIA) made a plea for 50 percent BCD at the earliest, comes the rejoinder from Solar Power Developers Association (SPDA). The SPDA is a national association representing India’s ‘upcoming’ solar power generators and developers, and says that the Government must reconsider its decision of imposing Basic Custom Duty on Solar cells and modules. With the Safeguard Duty (SGD) on cells and modules having been extended by a year recently, an additional tariff barriers at this stage is not appropriate as it will damage the sector’s prospects, according to the SPDA. The association claims that this will provide the right amount of time for execution of 50 GW of projects in the pipeline.

According to SPDA, Safeguard Duty has already resulted in an escalation in capital costs, and any additional duty can jeopardise the Government’s plan of having 100 GW of solar capacity by 2022.

Interestingly, as the government has tried to find a balance between domestic manufacturing and low cost solar power, the actual BCD imposition is already behind schedule. Power and MNRE Minister R.K. Singh, after promising it from August 1, had spoken about a 2-3 week delay recently. We are well past that period too now, making it clear just how tough the call is.

The Basic Customs Duty has been under exemption since March 2005.

“Imposing two duties simultaneously on one product is not only unfair but also counterproductive to achieving the target of 100 GW of Solar Power by 2022. Consumers must benefit from affordable and clean power possible through Solar Energy – the imposition of duties and taxes would have a cascading effect on power costs and could adversely affect the health of DISCOMs,” DG SPDA Mr Shekhar Dutt said.

The association claims that there is a severe risk of cartelisation if BCD comes into force, as demand for Solar PV equipment continues to be higher than domestic manufacturing capacity.

The SPDA also points to the upstream part of the value chain, i.e., polysilicon, ingots, and wafers, representing 30-35% of the total cost, which also deserve attention for local maufacturing.

They suggest that instead of making duty applicable to 100% of imports, options must be explored to tax only incremental imports, i.e., the quantum of modules uncatered by domestic manufacturers. This incremental capacity will taper down with an increase in domestic capacity. Additionally, more manufacturing linked tenders must be issued by the Government to give a boost to domestic manufacturing in India.

The  SPDA claims to represent around 50-member companies from the solar sector including all the large players who have actively contributed with more than 75% of total capacity operation in India.

The tug of war between the manufacturer groups and developer groups has been brewing for a while. It didn’t really have to come to this. With the subsidised rooftop category subject to DCR (Domestic Content Requirements), a well functioning rooftop sector would have absorbed a significant part of the domestic production, besides the 12 GW CPSU scheme. The delays and slipshod implementation in both has ensured that even existing manufacturing output doesn’t have a market, forcing domestic manufacturers to look at gaining a presence in utility scale solar at any cost.

As of now, speculation has been rife that BCD will be low, of deferred for a little more time, to take out projects where PPA’s have already been signed. Of course, there is a logjam building up there too,  as close to 8 GW of projects allotted to developers languish without a PPA in place as on date. No one is envying power minister R,K Singh right now as he seeks to balance competing demands with equally compelling arguments.

Interestingly, some of the largest developers seem to have decided to see the writing on the wall. Renew Power has already announced pans for a manufacturing set up, even as Adani Solar already had its own manufacturing set up. Azure Power is also on its way, while Tata Power is looking to expand too.