Expanding Domestic Solar Manufacturing: Key Exemptions and Policy Shifts in Budget 2024-25

The Union Budget 2024-25 emphasizes India’s commitment to energy security, efficiency, and transition, aligning with the Panchamrit Goals announced at COP26. A significant portion of the budget addresses solar energy initiatives and policies aimed at boosting renewable energy adoption and supporting the solar industry’s growth.

To support the manufacturing of solar cells domestically, the government has expanded the list of exempted capital goods used in their production. This move is designed to encourage energy transition by reducing costs for solar cell manufacturers​. However, the budget proposes not to extend the exemption of customs duties provided to solar glass and tinned copper interconnects. This decision reflects the government’s confidence in the domestic industry’s capability to supply these components without the need for continued import duty exemptions​.

One of the prominent announcements is the launch of the Pradhan Mantri Surya Ghar Muft Bijli Yojna, aimed at installing rooftop solar panels for 1 crore households, providing free electricity up to 300 units per month. This initiative has already seen substantial engagement, with 1.28 crore registrations and 14 lakh applications received since its launch on February 15, 2024​. This scheme is expected to significantly enhance the penetration of solar energy at the household level, driving the transition from traditional to green power sources.

Additionally, the budget highlights the need for a suitable financing mechanism to support the solar sector. It introduces a specific amendment under the Customs Act, which appears to deny the benefit of setting up solar power plants in Manufacturing and Other Operation in Warehousing Regulation (MOOWR), 2019. This change indicates a shift towards promoting domestic production capabilities over warehousing benefits for solar plants​.

Furthermore, the government has included photovoltaic cells and modules under a new exemption entry in the Customs notifications, providing a tariff item specifically for these goods. This step aims to reduce the production cost and encourage the manufacturing of photovoltaic cells and modules domestically​.

To ensure a steady supply of raw materials crucial for solar manufacturing, the budget completely exempts customs duties on 25 critical minerals such as cobalt, lithium, and rare earth elements. This exemption is vital for the renewable energy sector, as it helps in securing the materials necessary for manufacturing solar cells and other renewable energy components​.

In line with promoting the solar industry, the budget also stresses the development of a taxonomy for climate finance. This initiative aims to improve the availability of funds for adapting to climate change and reducing greenhouse gas emissions. By establishing clear guidelines and classifications for climate finance, the government intends to attract targeted investments into the green energy sector, including solar energy​.

The Union Budget 2024-25 demonstrates a robust framework to support India’s solar energy ambitions. Through targeted exemptions, financial mechanisms, and policy initiatives, the government aims to bolster domestic manufacturing, reduce dependency on imports, and make renewable energy more accessible and affordable for households. These measures are expected to accelerate India’s transition towards a more sustainable and resilient energy future.