The government recently announced that basic customs duty (BCD) would be levied for import of solar cells and modules with effect from April 2022. While the duty would be 25% in respect of solar cells, it would be 40% for the modules. The notification does not have any sunset clause, implying that the BCD would be levied till such time the government changes its mind.
The Chinese government saw the potential of the solar industry way back in the early 2000s and invested heavily in the supply chain, and everything was available just kilometres away, which significantly reduced their production costs. According to a report published by the IEEFA (2021), the government provided subsidies for land acquisition, ensured subsidised electricity to manufacturing facilities, and manufacturers were provided loans with phenomenally low interest rates for setting up manufacturing units. Following the 2008 financial crisis, the country set up the China Development Bank that supplied a line of credit to the tune of $30 billion to module and cell manufacturers. The government also extended cash grants to manufacturers for large-scale demonstration projects. Moreover, the Chinese Export-Import Bank lent support by providing export credits and export conditional loans at preferential rates. In addition to these policies, the Chinese government also provided refunds on interest paid on loans and electricity costs, granted tax holidays, provided subsidies on leases, etc.
[Somit Dasgupta and Diya Dasgupta]