Bridge India

Solar thermal will now be exempt from import duty in India

Solar thermal will now be exempt from import duty in India

India’s finance minister, Dr. Pranab Mukherjee, declared that solar thermal plant and equipment in India will now be exempt from import duty. “In order to fully realize our potential in the realm of solar energy, solar thermal projects need encouragement. I propose to fully exempt plant and equipment etc. for the initial setting up of such projects from special countervailing duties (anti-subsidy import duty)”; said the minister while announcing plans for the country budget for the upcoming fiscal year.

Till now the solar thermal sector has significantly lagged behind the solar PV sector in the Indian market. CSP installed capacity in India is a mere 8.5MW (as of February 15th, 2012) as compared to 481.48MW for PV technology. There is no domestic manufacturing base for CSP equipment in India and there are only a handful of experienced technology providers abroad. As such, developers are finding it difficult to find reliable, low-cost options, a necessity to make their projects viable at the low tariffs following the NSM auctions in the year 2011. With an absence of CSP technology in India and a lack of projects for reference, banks are exceptionally wary of funding CSP projects. This has led to stunted growth of the Indian CSP market.

In addition, CSP as a technology faces water issues that will require CSP developers come up with creative plant cooling solutions. There is also consternation about the 30% local content requirement.

While the key challenges to CSP in India remain, an exemption of import duty on plant and equipment contributes to an overall reduction of CSP project costs. This will invite greater investment in the Indian CSP market.

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