More tariff barriers, subsidized financing for encouraging the use of domestic equipment, rigorous testing of foreign equipment and prior approval requirements for imports from adversary countries are some of the focus areas of India ‘s proposed overhaul of the power sector currently underway.
This comes in the context of India’s contemplation of an economic response against China and is part of the wider decoupling exercise undertaken by the Government of India since the border clashes with China on 15 June.
Addressing the industry captains, power and new and renewable energy minister Raj Kumar Singh said that some countries who are adversaries or potential adversaries will be identified as “prior reference countries”, and a prior government permission will be required before importing any equipment from there.
This exemption will apply across the value chain of the power sector, including generation , distribution and transmission, both in conventional and green spaces, and will also apply to smart meters currently deployed across the country.
Singh said that it is very important to use equipment manufactured in India, as power is a strategic sector and added that whatever equipment is being imported will be tested and certified to prevent any ‘trojan horse’ or malware from slipping through.
This comes in the context of India’s power sector facing cyber attacks, with at least 30 incidents reported daily, Mint reported earlier. Most of the attacks originate in China, Singapore, Russia and the Commonwealth of Independent States (CIS) countries.
As such, there is growing concern that the country’s power infrastructure could be the next target of enemy forces seeking to cripple India’s economy. The grid collapse is the worst case scenario for any transmission utility. When that happens, states that draw power from a particular network go without electricity.
The rationale behind the comprehensive exercise unveiled by Singh on Tuesday is to deny income and job creation activities in those countries that are the adversaries of India. Singh said that military power is also linked to economic power and that economic power needs to be strengthened.
As a first step, starting 1 August, all imported solar cells, modules and inverters will be subject to a basic customs duty (BCD) as reported earlier by Mint. This will make imports from China expensive and, following the current protection duty on solar cells and modules imported from China and Malaysia, will expire on 29 July. This may result in a 20-country increase in solar tariffs for new contracts.
Also, in order to ensure that the projects already tendered and the electricity tariffs quoted are not met, the government plans to ‘grandfather’ such projects and collects details along with the provisional import date of the equipment.
Singh added that whatever was made in India would not be imported and said that the Indian would be willing to pay more for the power provided it was made in India.
Similar tariff barriers are also expected across the value chain of the power sector to support Atma Nirbhar Bharat or India’s self-reliant strategy articulated by Prime Minister Narendra Modi.
The Ministry of Power will also draw up a list that will allow only those manufacturers that are approved by the Bureau of Indian Standards and the Ministry of Power to be eligible for government-supported schemes, including projects from which electricity distribution companies supply electricity to their consumers. A similar approved list of modules and manufacturers (ALMMs) exists for the clean energy sector.
Singh said that the tariff walls would be built so that things would not be imported or dumped here.
He added that the policy framework will be leveraged to induce purchase equipment produced in the country and that tariff barriers will help to prepare the domestic manufacturing area for the next two to three years.
India is also looking to play a larger role in global supply chains in the context of the coronavirus disruption that originated in Wuhan , China.
China remains India’s second-largest trading partner after the US. India’s exports to China rose 3.8% to $17.1 billion in 2019, while imports contracted 7.5% to $68.3 billion in the same year. India remained concerned about the widening bilateral trade deficit with China.
Also, financing from state-owned public sector lenders Power Finance Corp. (PFC), Rural Electrification Corp. Ltd (REC) and the Indian Renewable Energy Development Agency (IREDA) will be structured in favor of those using equipment produced by providing concessional financing. These three companies are the largest lenders in the power sector.
The Government will also do away with the provision of certificates that allow imports to be subject to lower duties.
This isn’t the first move like this. Over the past week, the Indian Government has canceled key projects and contracts awarded to Chinese companies. Decisions include the barring of Chinese firms from providing telecommunications equipment to state-owned Bharat Sanchar Nigam Ltd.
