Solar industry awaits finance ministry decision on safeguard duty or Basic Customs Duty

Solar manufacturers, however, believe that the two together —safeguard duty and BCD — may get introduced from August 1, though the rate of BCD could be much lower than the 20% proposed initially.

The Directorate General of Trade Remedies (DGTR) has recommended extending the safeguard duty on solar panels and cells, scheduled to expire on July 30, by one year. While it is not clear whether the finance ministry will accept the recommendation, it also has the option of acceding to the industry demand for minimum 20% Basic Customs Duty (BCD) on these items to protect domestic manufacturers from cheap Chinese imports.

The government had levied safeguard duty on imported solar cells and modules from China and Malaysia in 2018 for two years. The ministry of power and ministry of new and renewable energy (MNRE) have been keen on introduction of 20% BCD as a long-term solution to curb influx of solar panels and cells from countries like China.
Union power minister RK Singh has said at various forums in the recent months that the BCD will be introduced from August 1.

However, the DGTR has recommended to extend the safeguard duty by one year at a rate of 14.9% in the first six months and 14.5% in the remaining six months. A senior MNRE official told FE, that the Ministry of Finance will have to notify the DGTR recommendations before July 30 for it to be effective. “We are working with the Ministry of Finance and have conveyed our recommendations of BCD as a long-term option against the temporary measures like safeguard duty to protect the domestic industry,” the MNRE official said.

The DGTR in its notification said, imports of panels and cells have not only continued to cause serious injury to the domestic industry but also threaten to cause serious injury to the domestic producers of panels and cells. “It will be in the public interest to continue the imposition of safeguard duty on imports.”

Seven months ago in January 2020, Mundra Solar and Jupiter Solar filed and application seeking extension of safeguard duty by another four years. But, DGTR believes one year extension is adequate for domestic industry to adjust positively.

“Keeping in view that two years of protection has already been provided and domestic industry has improved its position but needs some more time to adjust,” the notification said. “Further during this period, the existing quantum of duty would continue to be liberalised at a pace so as to ensure that adjustment by DI (domestic industry) is attained within the span of one year only,” it said.

Solar manufacturers, however, believe that the two together —safeguard duty and BCD — may get introduced from August 1, though the rate of BCD could be much lower than the 20% proposed initially.