Solar power projects to cost 25% more if government imposes customs duty

The government’s decision to impose a basic customs duty of 25% on imported solar photovoltaic cells and 40% on imported solar modules from April 2022 is likely to see solar energy tariffs rise. However, this will support domestic original equipment manufacturers (OEMs) by giving them the confidence to expand local manufacturing capacity as demand for imported modules falls.

However, clarity is awaited on the continuation of the safeguard duty (SGD) on imported cells and modules, which is currently at 14.5%, and valid till July 2021, a note from credit ratings agency Icra said.

“This is expected to result into an increase in the capital cost for a solar power project by 23-24% (capital cost factoring non-continuation of safeguard duty beyond July 2021),” Girishkumar Kadam, Co-Group Head, ICRA ratings, said in the note. “This in turn would result in an increase in tariff by about 45-50 paise per unit.