Budget 2024: Import Duty Exemption On Solar Gear To Cut Costs, Drive Adoption

The customs duty exemption granted to capital goods used for making solar cells and panels for up to 6 gigawatts of photovoltaic projects will help reduce the overall cost of solar panels and subsequently improve their widespread adoption, said industry officials following the announcement made by Union Finance Minister Nirmala Sitharaman in the budget on Tuesday.

Energy transition is critical in the fight against climate change, Sitharaman said in her budget speech. “To support the energy transition, I propose to expand the list of exempted capital goods for use in the manufacture of solar cells and panels in the country."

However, the exemption hasn't been extended for solar glass and tinned copper interconnects since there's enough domestic manufacturing capacity for these goods, Sitharaman added.

Vipin Tiwari, corporate strategy manager at AXITEC Energy India, said import duty exemptions for up to 6 GW of photovoltaic projects are a crucial step in making solar projects economically viable, as they alleviate part of the financial burden imposed by the basic customs duty. The current BCD on solar cells is 25% and 40% on solar modules. The exemption will help bridge the gap until domestic manufacturing fully meets the demand, Tiwari said.

The exemption, he said, aligns with India’s broader strategy to boost renewable energy and achieve the ambitious target of 280 GW of solar capacity by 2030. By easing import costs, this measure supports project developers in managing costs effectively, ensuring a steady pace of solar installations without financial setbacks.

Duty will be nil on solar manufacturing equipment, which was 7% earlier, will help reduce the price, he said. Additionally, now the duty on solar glass and interconnector will be 10% and 5%, respectively.

SK Gupta, chief financial officer of AMPIN Energy Transition, said the exemption is a welcome step and will promote in-house manufacturing of these components locally. Gupta also said the move to exempt customs duty on the import of lithium and other related chemicals will promote battery storage solutions for better integration of round-the-clock electricity.

He said the government should classify the renewable industry as part of ‘Priority Sector Lending’ and rationalise the indirect tax-GST rates on turbines and modules to 5% each, down from 12%. He also noted that corporate and industrial projects should be exempted from the Approved List of Models and Manufacturers.

Gopal Kabra, founder and managing director of GK Energy, said the customs duty exemption on capital goods for solar cells and panels is a "pivotal move." “This exemption is expected to lower production costs, making solar energy more affordable and accessible.”

Kabra noted that more than 1.3 crore registrations and over 14 lakh applications under the PM Surya Muft Bijli initiative are poised to accelerate rooftop solar installations, enhancing energy security and supporting the energy transition.

Additionally, the establishment of a carbon market will incentivise reduced emissions, aligning with India's climate goals. "These initiatives collectively reflect a forward-looking vision for a sustainable and self-reliant solar ecosystem in India."