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Impact of Budget 2025 on Solar Module Prices: Increase or Decrease?

The recent Budget 2025 announcements regarding changes in customs duties on solar cells and modules have created significant discussions about whether solar module prices will increase or decrease. Based on the CBIC order, the key factor influencing module costs is the modification in Basic Customs Duty (BCD) and Agriculture Infrastructure and Development Cess (AIDC), with different timelines for their implementation.

Key Duty Changes on Solar Imports:

• Solar Cells:
  • Tariff rate reduced from 25% to 20%, effective from May 1, 2025.
  • However, from February 2, 2025, imports will be subject to 20?D + 7.5% AIDC, resulting in an effective duty of 27.5%.
• Solar Modules:
  • Tariff rate reduced from 40% to 20%, effective from May 1, 2025.
  • However, from February 2, 2025, imports will attract 20?D + 20% AIDC, keeping the total effective duty at 40%.

Potential Impact on Solar Module Prices:

• While the Finance Bill aims to reduce customs duties from May 1, 2025, the introduction of AIDC from February 2, 2025, offsets these reductions in the short term.
• For solar cells, the duty drops from 25% to 27.5% (20?D + 7.5% AIDC). This slight increase could make solar cell imports marginally more expensive before the eventual drop in May.
• For solar modules, the duty remains unchanged at 40?cause the reduction in BCD is counterbalanced by the introduction of 20% AIDC. This means that module prices will not see an immediate decrease, but manufacturers could benefit from lower costs after May 1, 2025.

Alternative Interpretations of the CBIC Order:

• Short-term price stability, long-term decline: While February 2 changes maintain high duty rates, the effective reduction from May 1 could lead to cheaper modules in the long run.
• Increased costs for developers reliant on imports: Since the AIDC introduction offsets the BCD reduction, any developers importing modules before May 2025 will still face high costs.
• Local manufacturing incentives: The unchanged 40?fective duty until May 2025 continues to protect domestic solar manufacturers from import competition.

The short-term impact of Budget 2025 does not immediately lower solar module prices, but after May 1, 2025, costs could decline due to lower BCD rates. Developers should factor in timing considerations while planning their solar projects to benefit from potential cost reductions later in the year.