House Panel Slams 70% Safeguard Duty on Solar Equipment, Says It Could Cripple Entire Sector

Finalise the wind-solar hybrid policy as early as possible, the parliamentary standing committee on energy told the government.

New Delhi: A house panel has slammed the proposal to impose 70% safeguard duty on solar equipment, saying that if implemented it could impact the viability of existing projects and also put off potential investors.

“Custom duty on solar cells/modules/panels should not be levied and they should continue to enjoy exemption from custom duty as before. Safeguard duty should not be of the tune (70%) that will hamper our own programme and it should not affect the bids which have already taken pace,” the panel said.

The Directorate General of Safeguards’ proposal to slap a safeguard duty on solar equipment has been temporarily stayed by the Madras high court on a petition filed by Shapoorji Pallonji Infrastructure. The company had petitioned the court against the proposal, saying it was never given a chance to respond to the original petition on the basis of which the DG (Safeguards) suggested the imposition of 70% duty.

The company stated that there was a need to encourage domestic manufacturing, but it is hard to believe that domestic manufacturing will reach the production and efficiency level required to meet the target of 100 GW of solar energy in the next two to three years.

So, there are no valid grounds to take such emergency measures which have the potential to cripple the entire solar sector, the panel said.

At present, customs duty on solar cells/modules/panels is levied at the rate of 7.5%.

The parliamentary standing committee said because of the imposition of a safeguard/custom duty, project developers will suffer.

The Safeguard Authority had on December 19 issued a notice to all stakeholders saying it had initiated an enquiry into the matter on the basis of a petition filed by the Indian Solar Manufacturers Association which had claimed that large-scale imports of solar panels and modules from China, Malaysia, Taiwan and Singapore were causing “serious  injury” to domestic manufacturers of similar equipment.

The Parliamentary Standing Committee on Energy in its 39th report tabled in Parliament also advised the Ministry of New and Renewable Energy to take up the issue of confusion over good and services tax (GST) on the renewable energy sector and refund of input credit with the Finance Ministry.

The committee noted that GST rates for the renewable energy sector differ from 5% on solar modules to 18% on inverters to 28% on batteries.

It also observed that there were apprehensions that the applicable rate of GST on solar power generating systems which were not goods bought and sold in the market, would actually be 18% under “work-contract” rather than the intended 5%.

Similarly, in case of a solar power developer himself being an EPC (engineering, procurement and construction) contractor, he will not get the benefit of 5% GST on solar power generating systems as his final product is “electricity” which is exempted from GST. There is also an issue of refund of input tax credit leading to higher working capital requirement, the panel noted.

The house panel also said that the prevailing confusion regarding applicability of the GST rate and uncertainty over refund of input tax credit was not good for the renewable energy sector.

Such a situation, it said, would lead to increase in generation cost and pose a threat to the viability of ongoing projects, ultimately hampering target achievement.

On wind energy, too, the new and renewable energy ministry’s performance in 2017-18  was not up to the mark, the house panel said.  Credit: Dhruvaraj S/Flickr CC BY 2.0

The panel asked the Ministry of New and renewable energy to work in mission mode to get ready the Green Energy Corridor within the stipulated time if they are serious about the project.

On wind energy, the standing committee said the ministry’s performance in 2017-18  was not up to the mark because against a target of 4,000 MW, only 597.91 MW capacity had been installed as at the end of January, adding that the ‘achievement’ was even less than 15% of the wind energy target even as the budget allocated for each of the three years i.e. 2015-16, 2016-17 and 2017-18, had reportedly been fully utilised.

It said that the ministry should seriously seek more fund allocation so as to ensure that implementation of wind energy projects does not suffer.

The panel also urged the ministry to expeditiously complete offshore wind power assessment studies and surveys related to techno-commercial feasibility and grid infrastructure requirement for related projects.

The house panel suggested that the ministry should finalise the wind-solar hybrid policy “as early as possible”.  It pointed out that for 2017-18, against the target of 10,000 MW of grid-connected solar power, the ministry had been able to achieve only 6,166.15 MW, adding that ministry should work hard to achieve the target of 11,000 MW set for 2018-19.