The government has announced that it has extended the safeguard duty on Chinese solar power equipment by another one year till July 29, 2021, to help enhance local manufacturing.

A duty of 14.9 percent will be imposed on such imports for six months from July 30, 2020, to January 28, 2021, while the duty will be marginally lesser at 14.5 percent in the following six months, an official statement issued said.

Last week, the Directorate General of Trade Remedies (DGTR) had suggested an extension of the safeguard duty on solar cells and modules.

The country first levied the duty in 2018 for two years to avert dumping of Chinese solar equipment in the country, charging 25 percent in the first year, and 20 percent in the second.

The duty was charged on equipment from China and Malaysia where a lot of Chinese-owned solar companies are based. Though, in the government's latest announcement, Malaysia has been exempted.

The announcement does not mention any exceptions or a "grandfather clause", which would have permitted renewable energy firms to claim reimbursements on the duty they have paid while importing equipment from China, where 80 percent of India's solar equipment is obtained from.

Adding a "grandfather clause" to prevailing power purchase agreements would mean that there is an understanding between solar developers and the government that the project costs more than the assigned budget at the time of concluding of the deal, and hence, reimbursement will be delivered to the developers via the distribution companies.

Domestic solar equipment manufacturing desired the safeguard duty to be stretched for four years, but the DGTR said a one-year extension would be sufficient. Domestic solar manufacturing associations had welcomed this recommendation but demanded the rates to be increased to at least 50 percent.

Developers were previously expecting a basic customs duty (BCD) to swap the safeguard duty at the end of this month. Power and renewable energy minister RK Singh had lately told stakeholders that BCD of 15-20 percent on solar equipment would be levied in August, which would double in a year's time.

While no official statement has been made yet, industry stakeholders anticipate the BCD to be imposed along with the safeguard duty.

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