Solar Projects Lose Duty Sop, Rs 25 k crore Investment may be Hit

The Centre has scrapped concessional customs duty for solar projects under the project imports scheme, a move that industry players said will put a question mark over the viability of 5,000 MW (mega watt) capacity bid out before 2021 entailing an estimated investment of Rs 25,000 crore.

The revenue department on Wednesday notified the amendment to the Project Imports Regulations of 1986 to end the concessionary import duty for solar projects. The amended norm took effect on Thursday.

The project imports scheme allows import of machinery, instruments and apparatus etc needed for setting up new units or expansion of an existing unit at a concessional duty of 5%.

Solar promoters whose projects were already underway when the government announced in 2021 its intent to impose 40% basic customs duty on cells and modules from April 2022 took refuge under the scheme as utilities refused to bear the additional cost.

After the 2021 announcement, discoms (distribution companies) refused to pay a single paisa more than the tariff discovered through bidding and threatened to cancel the power purchase agreements, head of a Delhi-based solar major said requesting anonymity.

The concessional duty was an option that gave developers some safeguard for their investments, he said, adding now the promoters face the prospect of their PPAs being cancelled by utilities.

An industry analyst said 10,000 MW capacity auctioned before 2021 and about 5,000 MW capacity that are expected to be commissioned in the current fiscal will be particularly vulnerable to the latest change in duty structure.

He said moving forward, the latest duty tweak will give an edge to players that have major manufacturing plans such as Reliance Industries Ltd, the Adani group and others.

There were some players who said the loss of concessional duty could disturb the pace of capacity addition and impact the target of achieving 500 gigawatts capacity by 2030.