How the import duty of 40% on solar modules and 25% on solar cells is affecting the Indian Government’s solar capacity addition targets

In recent years, the Indian government has been actively pursuing a sustainable energy future, with ambitious targets for solar power capacity additions. However, the imposition of high import duties on solar modules and cells has been a significant obstacle to achieving these goals. In this article, we will explore how the import duty of 40% on solar modules and 25% on solar cells is affecting the Indian government’s solar capacity addition targets.

The Indian government has set a target of achieving 175 GW of renewable energy capacity by 2022, of which 100 GW is expected to come from solar power. This target was later revised to 450 GW by 2030. Achieving these targets requires a significant investment in solar infrastructure, including solar modules and cells. However, India’s domestic solar manufacturing industry is not yet capable of meeting the demand, and the country relies heavily on imports to meet its solar power needs.

In 2018, the Indian government imposed a 25% safeguard duty on imported solar cells and modules for two years, citing the need to protect domestic manufacturers and reduce dependence on imports. However, this was subsequently replaced by a basic customs duty of 20% on solar modules and 15% on solar cells in 2020. This was further increased in the 2021 Union Budget, with a proposal to increase the import duty on solar inverters from 5% to 20% and on solar lanterns from 5% to 15%.

The high import duty on solar modules and cells has had a significant impact on the Indian solar industry, making it difficult for developers to compete on price with coal-based power plants. The high cost of solar power is a major barrier to adoption, particularly in a country where access to affordable energy is critical.

The increased import duty has also led to project delays and cancellations, as developers struggle to meet the financial viability of solar projects. The increase in the import duty has led to a shortage of solar modules and cells, which has led to delays in project implementation, as well as increased project costs. This has a knock-on effect on India’s solar capacity addition targets, as the high import duty makes it more challenging to achieve the ambitious solar power targets.

The Indian government is actively exploring solutions to reduce dependence on imports and promote domestic solar manufacturing. The government has launched the Production Linked Incentive (PLI) scheme to promote domestic solar manufacturing, offering incentives for domestic manufacturing of solar modules and cells. The government has also proposed a Green Energy Corridor project, aimed at creating an integrated power transmission grid for renewable energy, which could help reduce the cost of solar power.

Another possible solution is to negotiate with other countries to reduce import tariffs on solar modules and cells. This could help to reduce the cost of solar power, making it more competitive with traditional fossil fuel-based power plants.

The imposition of high import duty on solar modules and cells is a significant barrier to achieving India’s solar capacity addition targets. The high cost of solar power is a major obstacle to adoption, making it difficult for solar projects to compete on price with coal-based power plants. However, the Indian government is actively exploring solutions to reduce dependence on imports and promote domestic solar manufacturing, which could help to reduce the cost of solar power and accelerate the adoption of renewable energy in India. It remains to be seen whether these measures will be successful in achieving India’s ambitious solar power targets.