Sustainability

Industry seeks lower customs duty
09 Jan 2024

Industry seeks lower customs duty on solar modules

Industry players have proposed the government to cut customs duty on capitals items – including solar modules – in an attempt to make production of Green Hydrogen commercially viable in India.

The import of renewable energy devices like solar modules is subject to “heavy” customs duties and taxes, which makes the setting up of Green Hydrogen facilities uncompetitive, say experts.

India’s solar photovoltaic cell manufacturing capacity currently stands at 3 gigawatts (GW) and the majority of module manufacturing capacity depends on imports.

As of now, the effective tax rate, including customs duty on the import of solar modules, is more than 60% – which subsequently gets passed on to output prices, thereby making Green Hydrogen or its derivative non-marketable.

Experts estimate that a renewable energy (RE) plant’s set-up cost constitutes more than 50% of the overall cost of setting-up a green hydrogen facility, and the overall tax cost of an RE plant is around 30%.

“In order to make manufacturing of Green Hydrogen viable in India, customs duty concessions should be offered on import of capital items required for setting-up of an integrated Green Hydrogen facility for a period of 2-3 years,” said Gulzar Didwania, partner, Deloitte India.

The government had announced the ‘National Green Hydrogen Mission’ – with an outlay of Rs 19,744 crore – in January 2023 to develop at least 5 MMT of Green Hydrogen production capacity per annum, with an associated renewable energy capacity addition of about 125 GW, in the country by 2030.

To do that, several capital items, such as feedstock, feedwater, and electrolyzer, apart from renewable energy, are needed to set up a Green Hydrogen production facility. Also, heavy expenditure has to be incurred to create proper storage mechanisms, transportation pipelines, and install safety systems.

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