India to tax solar equipment imports to help local companies

India will levy a 40% customs tax on imports of solar modules from April next year to cut dependence on foreign supplies and boost domestic manufacturing of the equipment, the renewable energy ministry said.

The finance ministry has approved the proposal, which also includes a 25% customs duty on imports of solar cells, the ministry said in a note published on its website. It didn’t mention for how long the taxes will apply.

India first proposed taxes on solar power equipment imports in the middle of last year following virus-related supply chain disruptions and deadly border skirmishes with China, which supplies nearly 80% of India’s modules.

“The rates are too high and will increase the cost of solar power for distribution companies and consumers alike,” said Pinaki Bhattacharyya, country head for India at renewable power producer Amp Energy. “The government should have provided direct subsidies to manufacturers to help them scale up their capacities and this would have been beneficial to the sector.”

As part of its strategy to transition to cleaner energy sources, India is planning to expand its renewable power capacity fivefold to 450 gigawatts by 2030. Some 280 gigawatts of that will come from solar, according to the ministry. The government sees the domestic solar manufacturing industry as vital to reaching that target, while the tax plan is also part of a broader push to help create jobs and revive an economy battered by the pandemic.

India currently levies a 14.5% safeguard tax on imports of solar cells and modules from most countries, including China, which is set to expire in July. Companies bidding in project auctions should take into account the government’s new tax plans, the ministry said.