In a bid to strengthen the Atmanirbhar Bharat initiative in the area of domestic solar manufacturing, India will now levy a 40 percent basic customs duty (BCD) on imports of solar modules from April, 2022. This will help cut dependence on foreign supplies and boost domestic manufacturing of the equipment, the Ministry of New and Renewable Energy said. A significantly large portion of India’s solar modules — nearly 80 percent — is imported for China.

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Along with the 40 percent customs tax, the finance ministry has approved a 25 percent customs duty on imports of solar cells as per the proposal. Currently, both, solar modules and solar cells do not attract a BCD. The customs duty will replace a 14.5 percent safeguard duty — set to expire in July, 2021 — applied on imports from China and Malaysia, the notification of the ministry’s website said. However, it did not specify how long the new taxes will apply.

The first proposal along these lines came after disruptions to the supply chain due to the coronavirus pandemic, and mounting tensions and border skirmishes with China.

The ministry said that the move will help strengthen the domestic solar manufacturing sector. “Presently, India’s solar sector, just like in any other country, is reliant on imports of solar equipment. The government has also noted instances of certain countries dumping solar cells and modules to kill the nascent domestic industry because of which the government had to impose safeguard duties," the notification read.

Citing India’s huge solar targets and the position of electricity as a strategic sector of the economy, the ministry stated that India would have to look towards reducing its dependence on imports and develop domestic solar manufacturing capacities.

"Scaling up domestic solar manufacturing would also enable India to export solar cells/modules. This would also provide other countries with an alternative avenue for procuring solar cells/modules," the notification said.