The renewable energy ministry has been in talks with the Ministry of Finance over the customs duty for nearly three weeks now. The power purchase agreements (PPAs) which were already signed remain the biggest issue between the ministries, according to people present at the meeting.
Last month, union power and renewable energy minister RK Singh had told reporters and industry stakeholders that projects signed before August 1 would be eligible for a “grandfather” clause, which would have allowed renewable energy firms to claim reimbursements on the duty they have paid while importing equipment from China.
Adding a “grandfather clause” to existing power purchase agreements would mean that there is an understanding between solar developers and the government that the project costs more than the allocated budget at the time of closing of the deal, and hence, compensation will be provided to the developers via the distribution companies.
80% of India’s solar equipment is sourced from China.
The industry also raised issues about the extension of project deadlines which are currently under construction. The ministry has marked a 68-day period as the official lockdown timeframe, and an extension of this along with an additional 30 days would be granted. However, stakeholders have requested for at least a six-month extension on deadlines, citing the various lockdowns imposed across different states and further problems with procurement of labour.
Although officials took notice of these concerns, no resolutions were brought up.
The ministry also clarified that the Ministry of Power’s earlier notifications about checking Chinese imports for malware or banning them outright would not affect the renewable industry. The supply chain would continue as earlier, provided all the necessary duties are paid.
Last week, the government decided to continue imposing safeguard duty on such imports for a third consecutive year. The basic customs duty was expected to replace the safeguard duty, as the former can only be imposed for a maximum of four years, and has to be progressively lowered, owing to World Trade Organisation‘s (WTO) safeguard measures. A duty of 14.9% will be levied on Chinese imports for six months from July 30, 2020 to January 28, 2021, while the duty will be slightly lesser at 14.5% in the following six months.