© Thomson Reuters FILE PHOTO: Workers clean panels at a solar farm in Modera.Written by Sarita Chaganti Singh and Nikunj Ori
NEW DELHI (Reuters) - India plans to halve solar panel tariffs and reintroduce a goods and services tax on household appliances as demand for renewable energy surges to make up for shortfalls in domestic electricity generation, three government sources said. .
© Thomson Reuters Solar panels installed on rooftops in ModeraIndia's Ministry of Renewable Energy is in talks with the Ministry of Finance to approve its proposal to cut income tax on solar panels from 40% to 20%, three people said, who declined to be named as the decision has yet to be made.
The two ministries are also expected to recommend to the GST Board of India to lower the Goods and Services Tax (GST) on solar panels from 12% to 5% by 2021, the sources said.
The Indian Ministry of Finance did not respond to a request for comment. “There is no such offer,” a spokesman for the Ministry of Renewable Energy said in a text message. He did not go into details of internal discussions and did not comment on them.
This change has given a boost to Indian solar companies such as Tata Power, Adani Green and Vikram Solar.
In April 2022, India removed a 40 percent tax on solar panel imports and a 25 percent tax on solar panels on imports from China as part of Prime Minister Narendra Modi's plan to increase renewable energy generation capacity and reduce emissions.
But domestic capacity is shrinking… Imports are needed to fill the gap,” one source said.
The proposal is part of a campaign for clean energy, from electric vehicle launches to sustainable jet fuel, as Modi aims to reach a goal of 365 gigawatts (GW) of installed solar power in 2031-2032.
India's current annual solar generation capacity is 32 GW per year, but the demand is 52 GW for green use, with cheap power coming from fast-growing offices, industrial plants and large factories.
Although solar currently accounts for more than half of India's renewable energy capacity, domestic production has been slow and the industry has been weighed down by high income taxes.
Highlighting the importance of the tax changes, a government official said India's reliance on imported solar panels is expected to be around 8-10 gigawatts per year over the next two years.
India will import $3 billion worth of solar panels in 2021-22, 92% of which will be from China, according to the government. Government sources said the tax cut could reduce the cost of imported modules by one-fifth and bring them closer to the prices of domestically produced modules.
(Reporting by Sarita Chaganti Singh and Nikunji Ori; editing by Aditi Kalari, Christian Schmollinger and David Evans)
