Solar sector imports down 83% even before government checks begin

New Delhi: The Covid-19 pandemic has dealt a severe blow to India's solar equipment imports from China, even before various government initiatives to check imports and boost domestic manufacturing set in.

As per Commerce Ministry data, Indian imports declined by 83 per cent in the April-June quarter of current fiscal, totalling $69 million (Rs 515 crore) as compared to $399 million (Rs 2,970 crore) during the same period last year.

These months saw the maximum impact of Covid-19 with lockdowns in several parts of the country and economic activity coming to a grinding halt. On a quarter-on-quarter (QoQ) basis, Indian solar imports fell by 54 per cent in April-June quarter, from $150.5 million (Rs 1,120 crore) in the January-March period.

According to renewable energy consultancy and communication firm Mercom, the slowdown in the imports is primarily due to the lockdown that has stalled project development activity in many parts of the country as the labour shortage continues.

According to the government data, a significant portion of Q1 imports in the solar sector continued from China as it still accounted for 77 per cent of the total imports in the April-June period. China is followed by Thailand at 7 per cent, Vietnam at 5 per cent, Singapore at 3.5 per cent and Cambodia at 3 per cent.

China's presence in Indian solar projects has remained strong despite actual imports falling on account of Covid-19. During the January-March period as well, China accounted for 79 per cent of the total imports to India.

The government is looking at various initiatives to reduce import content in solar projects, primarily to check imports from China with which its relations have nose-dived recently following the violent border clashes in Ladakh.

The Finance Ministry has already notified extension of safeguard duty on import of solar cells and module by another year that will impact countries such as China, Thailand and Vietnam. The duty will be levied at 14.9 per cent from July 30 to January 29, 2021, and 14.5 per cent from January 30, 2021, to July 29, 2021.

There is also a plan to levy a basic customs duty (BCD) on solar cells and modules. The Power Ministry has proposed a BCD of 20-25 per cent on solar modules that rises to 40 per cent in the second year and 15-20 per cent duty on solar cells, with this also increasing to 35-40 per cent in the second year.