According to the Ministry of Renewable Energy, India will impose a 40% tariff tax on imports of solar panels from April 2022 to reduce reliance on foreign equipment supplies and boost domestic equipment manufacturing. According to a note posted on the website, the proposal was also approved by the Treasury Department, including a 25% tariff on the import of solar cells. However, there was no mention of how long the tax would apply.
The first proposal to impose taxes on imports of solar panels was made last year after supply chain disruptions related to viruses and deadly minor border wars with China, the country responsible for the supply of nearly 80% of the modules India is responsible.
India plans to expand its renewable energies from 93 gigawatts to 450 gigawatts by 2030 and 175 gigawatts by 2022. According to the ministry, around 280 gigawatts of electricity capacity will come from solar energy.
The country currently does not impose tariffs on solar module and cell imports, but has a security obligation to protect its local industry, which will expire in July. India is currently levying a protective tax of 14.5% on solar module and cell imports. To meet Prime Minister Narendra Modi's bid to install at least a hundred gigawatts of solar energy by 2022, the country is importing the majority of its solar cells and modules from China.
The main reason for this tax levy is because the government sees domestic solar production as an important means of reaching the promised supply, but one of the reasons is also that this move would also help create jobs and revitalize the collapsed economy due to the sudden arrival of the pandemic and subsequent statewide lockdown going down the drain.
India's renewable energy capacity as of November 2020
According to a report, the total installed capacity of India's renewable energy sector had exceeded 90,000 MW in November 2020. In November itself, an estimated 463 MW of new capacity was added in the renewable energy sector, adding to the cumulative renewable energy sector capacity of around 90.4 GW in India as of November 30, 2020.
In the period April-November 2020, a total of 3321 MW of new capacity was added in the RE segment, which is less than a quarter of the capacity increase targeted for the 2020 financial year.
A new target of 14,380 MW has been set by the government for the 2020 fiscal year. Of this, 11,000 MW of the target should come from solar energy, in the form of 9000 MW from open space projects and 2000 MW from roof capacity and the wind segment with around 3000 MW of capacity. 2,283 MW (of which 1,396 MW from open spaces and 887 MW from the roof) came from the solar sector and 690 MW of new power came from the wind power sector and this is based on the data from the Union Ministry for New and Renewable Energies (MNR)
With three tenders on a utility scale with a capacity of 110 MW and two tenders for solar roof systems with a capacity of 60 MW, the tendering activity in November 2020 was moderate.
According to a report from Bridge to India, a renewable energy consultancy, tenders and auctions are slowing down each month and several changes in bidding guidelines, changes in bidding specifications, and Discoms' reluctance to sign PPAs have resulted in one Kind of uncertainty led to the market. What is interesting, however, is that the center has also taken more and more measures to support developers who have faced financial problems and challenges in securing bank limits.
The Treasury Department had also announced that the requirements for the deposit of funds (EMD) and the performance bank guarantee (PBG) were relaxed. The Treasury Department had instructed Public Enterprises (PSUs) to lower the PBG for new tenders. The ministry has also instructed PSUs not to require EMD in tenders equipped by December 31, 2021.
These measures should reduce the costs associated with PBG and EMD. The progress of the wind energy sector has been declining in recent years, so the government tried to break down the barriers and intensify the grid infrastructure and land allocation to solve the problem of wind energy sector challenges in the market.