BENGALURU: The Ministry of New and Renewable Energy is likely to clarify the matter of basic customs duty (BCD) on imported solar equipment within the next two months. A 20 percent basic customs duty had been announced in the last budget, but has not been imposed yet.

Developers have been keenly awaiting such a clarification since the duty will impact their cost of setting up a project and thereby the tariff they charge for the power generated.

"We have to finalise it with the ministry of commerce and the ministry of finance. The department of revenue has already said it is ready to implement whatever duty structure is decided by the two ministries," said Amitesh Kumar Sinha, Joint Secretary, Ministry of New and Renewable Energy at a webinar organised by renewable energy consultancy firm Bridge To India.

There is already a safeguard duty on solar panels and modules imposed in July 2018 which will expire on July 28 this year. The idea was to level the playing field for Indian manufacturers who were unable to compete with their Chinese rivals on price. The objectives however have not been met. Local solar manufacturing remains what it was two years ago, and Indian solar developers continue to meet 80-85 percent of their equipment needs through imports as before.

Sinha said BCD, unlike safeguard duty which is limited to two years, would be enforced for an extended period of time.

"BCD is a more effective barrier than safeguard duty since it is applicable to imports from all countries. Now that safeguard duty and other measures to support domestic manufacturing have failed, the government seems inclined to bring BCD regime for the whole solar value chain. We expect the levy to be in the 20-30 percent range and be applicable for a longer period of 5 years or even more," said Vinay Rustagi, Managing Director, Bridge To India.

However, developers are worried about the impact BCD will have on solar tariffs and the consequent acceptability of such power by discoms.