Expected rise in Solar Panel prices: custom duties here to stay
The customs duty, which add up to 10% of Solar Panels cost, would NOT be scrapped altogether as confirmed after a meeting between MNRE and the finance secretary (refer). This would mean that the presumptions, about decreasing price of solar, of many developers may not come true, based on which they may have quoted to their clients or PPAs signed.
However, those developers who have won auctions expecting the customs duty would be ‘protected’. That does not necessarily mean that the exemptions would be provided to them. It may be given in another form too which has not been specified. Of course, this would be for projects that have already been won and not the ones that follow.
What we can expect is the tariff of INR 2.44 to be a minimum point for solar tariffs, which would rise going further (at least for a while).
On the positive side, an increase in solar panel prices imported from outside India would make the Indian panels at par with foreign ones possibly pushing sales up for them considering a shorter fulfillment time.
Further, with Indian panel prices at par with foreign ones (post imposition), we may also see Make in India finally pick up with a possible change in scale of operations of Indian Module Manufacturers since they would be assured returns (demand based) as long as these duties are in place. Looking at it from a pure economic standpoint, this would be a definite boost to manufacturing of Solar Panels in India with expectations of achieving economies of scale in the sector.