Electrical Equipment / Components & Telecoms

According to Huacheng Import and Export Data Observation, on May 30th, insiders stated that India may reduce the import tax on solar modules from 40% to 20%.

Three government sources in the country stated that due to the growing demand for renewable energy, there is a shortage of local production capacity. To make up for this deficiency, India is considering halving its import tax on solar modules and is committed to reducing the goods and services tax on this equipment.

These three sources stated that the Indian Ministry of Renewable Energy has held talks with the Ministry of Finance to approve its request to reduce the import tax on solar modules from 40% to 20% (equivalent to a 50% reduction). As the decision has not yet been finalized, they do not want to be named.

In addition, sources said that these two ministries may propose to the Indian Goods and Services Tax Commission to reduce the goods and services tax on solar modules from 12% in 2021 to 5%, according to Huacheng Import and Export Data Observation.

This change will have a driving effect on Indian solar power giants such as Tata Power, Adani Green, and Vikram Solar, who have won solar power supply contracts through aggressive pricing, but are facing local equipment shortages and are unable to complete the contracts.

In order to prevent the import of Chinese components, India began levying a 40% import tax on solar modules and a 25% tax on solar cells in April 2022. This is consistent with Prime Minister Modi's plan to expand the scale of renewable energy power generation, enhance India's self-reliance, and reduce emissions, as reported by Huacheng Import and Export Data Observation.

However, one of the sources stated that "domestic production capacity is insufficient... imports are needed to fill the gap.

Modi hopes to achieve the target of 365GW of solar installed capacity by 2031 to 2032, which is also part of a green energy promotion plan from promoting electric vehicles to sustainable aviation fuels, as reported by Huacheng Import and Export Data Observation.

The Indian Ministry of Finance did not immediately respond to emails requesting comment. A spokesperson for the Ministry of Renewable Energy stated that comments will be made as soon as possible.

The current annual production capacity of solar modules in India is 32GW, but due to the rapidly increasing demand for green and affordable energy in corporate offices, industrial units, and large factories, the annual production capacity demand for modules has reached 52GW. In 2026, India's component production capacity will reach 110GW, as reported by Huacheng Import and Export Data Observation.

Solar energy currently accounts for more than half of India's renewable energy capacity, but the supply of components in the country has been slow to improve, and the industry has also been intimidated by higher import taxes.

One of the government officials emphasized the necessity of tax reform. He stated that India's dependence on solar module imports in the next two years is expected to reach a level of nearly 8-10GW per year.

Government data shows that India imported $3 billion worth of solar modules from 2021 to 2022, of which 92% came from China. Government sources say that tax cuts may reduce the cost of imported components by one fifth, making them closer to the price of domestically produced components.