Why solar power developers asked government to postpone the imposition of Basic Customs Duty (BCD)

Solar power turns solar energy into electricity by photovoltaics (PV), concentrated solar power (CSP), or a combination of the two. Basic customs duty on imported solar photovoltaic cells and modules is matter of concern today for most Solar developers.
If Solar Developers don’t finish their Solar Panel for factory projects before the government imposes basic customs duty (BCD) on imported solar photovoltaic cells and modules next year, the cost of their projects will skyrocket.
After the current safeguard duty on such goods expires on April 1, 2022, the BCD will take effect. This is expected to instill confidence in domestic producers, allowing them to invest in capacity expansion. Power producers, on the other hand, will be pushed to race to complete projects on time with imported equipment to keep costs down and their projects profitable.
On March 9, the Ministry of New and Renewable Energy (MNRE) announced a 40% BCD on solar modules and a 25% BCD on solar cells. The ministry stated that it wanted local enterprises to not only create enough solar cells and modules to meet domestic demand but also to become major global suppliers. The customs duty will replace a 14.5 percent safeguard duty on goods from China and Malaysia.
The MNRE issued a list of approved models and module manufacturers for government projects on March 12, creating a non-tariff barrier to prohibit substandard imports.
In 2020, India planned to build about 3.6 GW of utility-scale and rooftop solar power, up from 6.5 GW in 2019. Almost all of the cells and modules utilized in these projects are imported, with China providing most of the supplies.
This year, India is slated to add about 13.5GW of capacity, the majority of which are projects that have had their deadlines extended due to covid-related construction constraints. Before the BCD sets in, these developers are anticipated to import equipment to finish their projects.
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In the short term, the BCD will reduce Solar’s cost advantage (over other renewables), The rise will definitely have a negative impact on demand, especially because distribution companies are already hesitant to buy solar power in its purest form. Rooftop solar, particularly in the residential market and other consumer-oriented applications, is expected to be the hardest hit.” In a report released on March 11, credit rating agency ICRA predicted that the BCD would raise the capital cost of solar power projects by 23-24 percent. Domestic modules are currently 12-15 percent more expensive than imported modules.
However, a capacity increase over the next year should see a spike as developers (and end customers) move project execution earlier to prevent BCD costs. While most tenders now include a uniform change-in-law compensation formula, the process is insufficient and leaves developers with a little financial loss.