The Indian government has increased the basic tariff (BCD) on solar inverters as part of an effort to strengthen domestic manufacturing, but has excluded modules from changes.
Finance Minister Nirmala Sitharaman unveiled the country's budget for 2021-2022 yesterday (February 1, 2021) and said the government would increase the tariff on solar inverters from 5% to 20%, with the change going into effect today.
It was also announced that a duty exemption will be “lifted” for all machines, instruments, devices, components or aids for setting up solar projects.
Sitharaman said the customs policy has the dual aim of encouraging domestic production and increasing the country's export potential. “The focus must now be on easy access to raw materials and the export of value-added products,” she added.
Vinay Rustagi, managing director of the consulting firm Bridge to India, said the BCD changes “surprised everyone as the industry expects modules to be mandatory, not inverters”.
“The effects on domestic manufacturing will inevitably be positive. Companies like Huawei and SMA with no manufacturing presence in India will lose if they do not set up domestic factories to maintain parity with TMEIC, Sungrow, TBEA, Fimer (ABB), etc. “
In terms of the impact on project developers, the tariff increase is expected to increase project costs by around 0.5%, according to Rustagi. “However, the developers will not welcome any further cost increases due to (non-related) increases in module and BOS [Balance of System] Costs. You should be able to request legislative changes, but this requires a lengthy and time-consuming process to validate the actual cost increase and the impact on tariffs, ”he added.
The changes follow a recent announcement by Prime Minister Narendra Modi to offer production-related incentives for high-efficiency solar panels to make India a “global manufacturing hub” in the renewable energy sector. Sitharaman acknowledged the “great promise” that solar offers for India and said yesterday that the government would publish a phased manufacturing plan for solar cells and modules.
Sitharaman also announced tariffs on some energy storage components, with inputs, parts and bases for lithium batteries – with the exception of lithium cells or circuit boards – seeing BCD rise from 0% to 2.5%.
Dr. Rahul Walawalkar, president of India Energy Storage Alliance, told sister publication Energy-Storage.news that some provisions in the household are positive signs of encouraging clean energy consumption and domestic production. He said the alliance is determined to build a “robust R&D and manufacturing sector” in India.
Other clean energy budgeted developments included a “capital injection” of INR 10 billion (US $ 137 million) for the Solar Energy Corporation of India and INR 15 billion (US $ 206 million) for the Indian Development Agency renewable energies as well as a “hydrogen energy” mission “is launched to support the production of hydrogen from renewable sources.