EQ organized a webinar on ‘Make in India: Level Playing Field for SEZ and DTA Units’ on June 4, 2021. The speakers of the webinar presented their views on the topic.
Ruchin Gupta, Director Solar – MNRE, Government of India, participated as a keynote speaker in the webinar. Vineet Mittal, Director, Navitas Green Solutions Pvt Ltd, participated as moderator.
Other members of the panel included Bimal Jindal, Director- SCM, SB Energy (SoftBank Group); Manish Gupta, Director, Insolation Energy; Prashant Mathur, CEO, Saatvik Green Energy (P) Ltd; Hiten Parekh, CBO, Solar Square; Hiten Parekh, CBO, Solar Square; Chetan Shah, Director, Solex Energy Ltd; Prasoon Chaudhary, Business Unit Head – PV- Manufacturing, Pennar Industries Ltd; Rajesh Singh, Vice President – Operations, RenewSys India Pvt. Ltd; Ajay Mishra, GM Marketing, Waaree Energies Ltd and Naveen Sharma, Director- EnKing International.
Vineet Mittal said, “DTA is Domestic Tariff Area which is a normal zone anywhere in the country. And then Special Economic Zones (SEZ), which is also part of the country but for various purposes, we call it a foreign land where different rules apply for Special Economic Zone. So, the factories which are manufacturing their products in SEZ have a certain set of rules.”
“If you want to export to India from SEZ, then the company has to pay BCD, while DTA is suffering a lot due to this. As DTA players are paying all the duty and GST at the time of importing the goods, so they are at a loss if they (DTA) will be put at par with the SEZ,” says Vineet Mittal.
Bimal Jindal, Director- SCM, SB Energy (SoftBank Group), shared his insights on the topic. He said, “If I look at SEZ, it is not going to be easy, even if the government want to do something because they are talking about Make in India or Atmanirbhar Bharat, the practical constraints will be too high. SEZ enjoy many benefits.
First of all, when we say they will be treated as a foreign territory, although they are within India for all the export purposes. So, it means that they are exempted from all the duties.
If we talk about DTA, if they are importing the raw materials like glass, steel or anything. So, if their duty is applicable, they need to pay it while SEZ will not pay anything, and when they are again sending it outside, they are not paying anything.
So, they are enjoying the benefits, and I don’t know how that would practically work out to keep two separate books for the same unit, which will distinguish what this material is going to manufacture for consumption in India and what will be exported. It may not be easy.
The second challenge will come up about income tax and other benefits. So, that is also given to SEZ, and again, the DTA will not qualify for that. If this benefit is given and availed by them, again SEZ is typically export-oriented units that focus 100 per cent of their energy to manufacture and ship it outside. In fact, they work on behalf of DTA units also.
While it is a good thought, it may promote a couple of manufacturers. But if they set up their units in SEZ, they want to be part of India, they want to contribute, so we need to hear how that can work out.
There might be many practical issues that need to be handled. There are many logistic issues which need to be managed. On top of that, the accounting issues will also prevail. So, it is a very complex subject. It may be possible if they can have a further extended arm that can utilize the same raw material and everything.
DTA is not getting any advantages like SEZ. My thought will be it is a good thought process. Practically, it may not be easy. It has larger consequences on all the industries not maintained to solar.”
Ajay Mishra, GM Marketing, Waaree Energies Ltd, said, “These days SEZ players are also paying duty on glass, EVA, and back sheet, before it was not there, now SEZ players are paying the same anti-dumping duty as DTA.
China has already taken the lead so we should focus on the entire ecosystem of solar modules, which can attract investors. If BCD will come, the Chinese will increase the raw materials price and reduce the modules.
So, BCD should not be there in the SEZ players. Developers should start accepting the Indian manufacturers, as Indian manufacturers are exporting to foreign so why can’t we supply to Indian Market.”
“Now, SEZs are no more treated as a foreign land. Whatever duties DTA units are paying, the same duties SEZ pays. So, there is no difference as such. When we are importing materials in SEZ, we are paying the same duties that we are paying in DTA units,” said Ajay Mishra.
“I feel, whether it is in SEZ or it’s in non-SEZ, it is in India. The manufactures are from India. So, for the better good of the entire industry, as such, there shouldn’t be a differentiation whether it’s a SEZ unit or a DTA unit. The focus should be on promoting the entire ecosystem. The focus should be on the promotion of manufacturing in India.
There is already a level playing field right now. But, once the BCD is implemented, I think there should be a clarification given which will say that BCD will not be applicable on the SEZ unit.”
Manish Gupta, Director, Insolation Energy, shared a presentation discussing the topic in detail. He said, “The issue which is coming out regarding the confusion of SEZ and DTA on BCD, should get settled down as time is there, and BCD is going to come from April 2022. The 80 per cent of the manufacturer are there in the DTA area, while 20 per cent are there in SEZ of the total 16 GW module manufacturing capacity?
If there is any duty that is only being paid by DTA players, but not the SEZ companies. So, if SEZ is supplying or selling goods to DTA, SEZ has to pay countervailing duty which was been benefited SEZ players.”
“Still, they have a lot of benefits than the DTA. We are very happy that the government listened to our voice”, he added. He discussed the topic in detail.
Ruchin Gupta, Director Solar – MNRE, Government of India said, “The SEZ issue is there and DTA companies are asking us to give parity over the SEZ players.”
“I think this issue of parity between DTA and SEZ has been going on quite some time. Fortunately, we have been taking this issue, writing to the Ministry of Finance and Ministry of Commerce.
And this budget has fortunately addressed this thing and how the scales of time are turning now because I am sure once we have this BCD, we will have an altogether different kind of dynamics.
The people from SEZ are asking for parity between DTA and SEZ. My best wishes, hope we will be able to establish some kind of parity between DTA and SEZ. What we could not do so far before this budget, probably, we may be able to do something once the BCD is out. Nevertheless, the things have been put straight by the budget and I think that is a good point.”
Chetan Shah, Director, Solex Energy Ltd, “The basic concept of setting up industry in SEZ or DTA should be very well known to everybody. The majority of the target market is DTA, that is the domestic market, then one should not think of setting up a unit in SEZ.
The purpose of having a SEZ Act is only to promote export, no domestic market at all. That is the reason, all the benefits and the special treatment which are given to SEZ units are the purpose for export, to earn the foreign exchange and increase of export.”
He explained the major points, incentives and finance, in detail. “As industry, we need to grow at a micro-level to ensure that there is word called level playing field which is actually implemented.
Prasoon Chaudhary, Business Unit Head – PV- Manufacturing, Pennar Industries Ltd, spoke on the ultimate goal of why the SCZ goals are set up. “The ultimate object of setting up SEZ is to improve the trade balance and attraction towards FDI.
DTA is paying 18 per cent tax which is around INR 20 lakhs per MW of module more than the SEZ unit due to tax benefit. And, there is no clarity, and problems are increasing day by day.”
“I don’t think there should be two kinds of structures between the organizations which are manufacturing the same product and trying to serve the same market.”
Rajesh Singh, Vice President – Operations, RenewSys India Pvt Ltd, said, “ If SEZ is going to supply to the DTA area, they just have to pay customs duty, they are not paying import duty which DTA companies are paying while importing raw materials. Advance An authorization Scheme is available, which will bring both the SEZ and DTA players at parity.
Working capital is the main benefit that SEZ players are getting over DTA, while DTA has to pay at the time of importing goods. The SEZ players have started setting up units in DTA, and many will be ready before the BCD.
Naveen Sharma, Director, EnKing International, said, “I would say, two companies can play on the same field until and unless there is something which can be compared. As far as I can say, there is no comparison between these two, and ultimately this cannot be the level playing together because of the huge difference in the policy and the benefits associated with units of SEZ and non-SEZ.”
Conclusion
The manufacturers need more clarity over the SEZ and DTA such as how the BCD is going to impact the SEZ players. India should come up with plans where we can give tough competition to the Chinese players.
As, India is a large market for Solar, and the target from the government is quite huge, so government should start supporting domestic manufacturers instead of collecting tax revenue.
India should also think about lithium-ion battery storage as it is the next big thing, we don’t have a good policy for energy storage. It should not be like India can lose the race as to how we lost in the whole supply chain of solar PV modules.
Indian should invest more in R&D instead of just copying the technology from China, such as we are still producing 5 bus bars to 6 bus bars modules, where Chinese are already supplying nine bus bars, and soon 12 bar bars are going to flood the market. Again, Indian developers should work hand-in-hand with the domestic manufacturers, which will boost their morale of investing in Solar.
