The duty will progressively be increased to 30% and 40%, one of the sources said. (Representative image)

To curb the procurement of solar generation equipment from China, and increase the reliance on domestic manufacturing, the government is planning to impose the basic customs duty (BCD) on imports of such products.

Though solar imports from China have gradually fallen since the imposition of the safeguard duty in July 2018, it still remained the largest source of solar cells and panels in April-December FY20 with imports worth $1.2 billion. A 20% BCD on these products was proposed in the Budget, but the Ministry of New and Renewable energy (MNRE) had clarified that the levy will not be imposed at least till the expiry of the safeguard duty regime.

People aware of the development told FE that the MNRE will soon be sending its recommendations to the finance ministry, suggesting levying 20% BCD on imports of solar cells and panels. The duty will progressively be increased to 30% and 40%, one of the sources said.

The government in July 2018 had imposed a 25% safeguard duty on import of solar cells from China, Malaysia and developed countries. The duty period ends next month, and currently the safeguard duty stands at 15%.

In the first nine months of FY20, solar equipment of $1.5 billion have been imported and Chinese companies found new ports to export their products. Imports of solar cells and modules from Vietnam ($127.2 million) and Thailand ($110.4 million) were 842% and 1,352% higher, respectively, compared to FY18 when there was no safeguard duty.

Overall imports of solar equipment fell 60.2% between FY18 and April-December FY20, while imports from China declined 65.5% in the same period.

The country’s domestic manufacturing capacity stands at 11 GW for panels and 3 GW for cells, though about 50% of the capacity remains unutilised due to price and quality concerns. However, the gap between the landed cost of local product and its Chinese counterpart has gradually narrowed to about 1.5 cents per watt.

As on May 31, the installed renewable energy capacity was 87.4 gigawatt (GW). Further, an additional 35 GW is under various stages of implementation and 34.5 GW under different stages of bidding.