Tax dispute stalls solar panel cargoes in India, delaying projects

Several solar projects in India are facing delays and inflated costs as customs officials have blocked more than 900 containers of panel shipments for more than a month by demanding higher import duties.

Officials clearing import shipments at the Port of Chennai in South India are classifying solar panels as motors, which attract 7.5 percent import duty as opposed to zero on solar modules, said Sunil Jain, chief executive officer of Hero Future Energies Ltd., a company backed by International Finance Corp. A 30-megawatt shipment of Hero Future was cleared after paying higher duties, he said.

The spat risks imperiling Prime Minister Narendra Modi’s goal of installing 100 gigawatts of solar energy by 2022. To meet that target, developers have relied on low-cost cells and modules from China, enabling tariffs in India to fall to among the lowest in the world. India is China’s second-biggest market for solar equipment with imports worth $3.2 billion for the year ended March 31, according to Bloomberg New Energy Finance research.

The industry has the option to approach a tribunal after an investigation is complete and an order is passed, a customs official said, asking to not be identified. The tax department contends that the shipment will attract higher tariff as it contains fitments apart from panels that can power other appliances.

New York listed Azure Power Global Ltd, whose shipment was also held back, is struggling to meet project deadlines.

“We had imported 40 megawatts of modules earlier in the year from the same port without any hassles and now, suddenly, we can’t get more panels from there,” Azure Power Chairman Inderpreet Wadhwa said.

Anand Kumar, the top bureaucrat at the ministry of renewable energy, said he has written to other departments to sort out the confusion. D.S. Malik, a finance ministry spokesman, couldn’t be reached for comment. Indian customs falls under the country’s finance ministry.

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