India, in its pursuit of scaling up renewable energy generation and achieving self-reliance, is contemplating significant policy changes to stimulate the solar power industry. The government aims to address the gap between the rising demand for renewable energy and the insufficient local production. This essay explores India’s proposal to reduce the import tax on solar panels by half and rollback the goods and services taxes (GST) on these devices.

Background:

To discourage Chinese imports and promote domestic manufacturing, India implemented a 40% import tax on solar panels and a 25% tax on solar cells in April 2022. These measures were part of the Prime Minister’s strategy to enhance self-reliance and reduce emissions through the expansion of renewable energy generation.

Reduction in Import Tax on Solar Panels:

The Indian government plans to lower the import tax on solar panels from the current rate of 40% to 20%. This decision aims to bridge the gap between the local production capacity and the growing demand for solar panels. Key points to note include:

  • The tax cut could potentially reduce the cost of imported panels by one-fifth.
  • This move is expected to align the prices of imported panels with those of domestically manufactured modules.
Rollback in Goods and Services Taxes (GST) on Solar Panels:

In addition to the reduction in import tax, the Indian government intends to lower the GST on solar panels. The GST rate on solar panels, previously set at 12% in 2021, will be reduced to 5%. The following points highlight the significance of this decision:

  • The reduction in GST will further decrease the overall cost of solar panels.
  • Solar power giants like Tata Power, Adani Green, and Vikram Solar, who have secured solar power supply contracts, will benefit from this change.
Implications and Objectives:

The proposed policy changes have broader implications and align with the Indian government’s objectives to promote renewable energy and reduce dependence on imports. Key aspects to consider are:

  • India’s target is to achieve 365 gigawatts (GW) of installed solar capacity by 2031-32.
  • The current annual manufacturing capacity of solar panels in India is 32 GW, while the requirement stands at 52 GW.
  • In 2021-22, India imported solar panels worth $3 billion, with 92% originating from China.
  • The tax cuts aim to stimulate domestic manufacturing, increase competitiveness, and reduce reliance on imported solar panels.
India's Solar Power Revolution: What You Should Know
Courtesy:Organiser

Important Points:

  • India considers cutting import tax on solar panels by half (🔀)
  • Government plans to reduce import tax from 40% to 20% (📉)
  • Goods and Services Taxes (GST) on solar panels to be lowered from 12% to 5% (⬇️)
  • Aim to compensate for the local production shortfall (⚖️)
  • Boost for solar power giants like Tata Power, Adani Green, and Vikram Solar (💪)
  • Tax cuts may reduce the cost of imported panels by a fifth (💰)
  • Aligning imported panel prices with domestically made modules (🔁)
  • India’s target: 365 GW of installed solar capacity by 2031-32 (🎯)
  • Current manufacturing capacity: 32 GW per annum; requirement: 52 GW (⚙️)
  • $3 billion worth of solar panels imported in 2021-22; 92% from China (🌍)
Why In News

India, in its drive to bolster renewable energy generation and attain self-sufficiency, is currently considering substantial policy modifications aimed at invigorating the solar power industry. The government’s objective is to bridge the gap between the escalating demand for renewable energy and the inadequate local production. This essay delves into India’s proposition to halve the import tax on solar panels and roll back the goods and services taxes (GST) imposed on these devices.

MCQs about India’s Solar Power Revolution

  1. Which companies are expected to benefit from the proposed tax cuts on solar panels?
    A. Tesla, SunPower, and First Solar
    B. Tata Power, Adani Green, and Vikram Solar
    C. LG Electronics, Hanwha Q Cells, and Canadian Solar
    D. JinkoSolar, Trina Solar, and JA Solar
    Correct Answer: B. Tata Power, Adani Green, and Vikram Solar
    Explanation: The Tata Power, Adani Green, and Vikram Solar are some of the solar power giants that have secured solar power supply contracts. Therefore, they are expected to benefit from the proposed tax cuts on solar panels.
  2. What are the major Indian solar power companies ?
    A. Tata Power, Adani Green, and Vikram Solar
    B. Suzlon Energy, Azure Power, and ReNew Power
    C. Lanco Solar, Moser Baer Solar, and Waaree Energies
    D. Mahindra Susten, Hero Future Energies, and ACME Solar
    Correct Answer: A. Tata Power, Adani Green, and Vikram Solar
    Explanation: Tata Power, Adani Green, and Vikram Solar as some of the solar power giants that have won solar power supply contracts. These companies are expected to benefit from the proposed tax cuts on solar panels.
  3. Question: What is the proposed reduction in the Goods and Services Tax (GST) rate on solar panels in India?
    A. From 15% to 10%
    B. From 12% to 5%
    C. From 8% to 3%
    D. From 10% to 7%
    Correct Answer: B. From 12% to 5%
    Explanation: The government plans to lower the Goods and Services Tax (GST) rate on solar panels from the current 12% to 5%. This reduction aims to further decrease the overall cost of solar panels and promote renewable energy adoption.

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