Government Approves Solar System Installation for SEZ Developers’ Captive Consumption

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Responding to requests from the Export Promotion Council for Export Oriented Units (EPCES) and Special Economic Zones (SEZs), the Ministry of Commerce has permitted developers of SEZ and units within SEZs to install solar systems for their own use. In a clarification, the ministry indicated that SEZs are allowed to receive duty benefits under Section 26 of the SEZ Act for the installation, operation and maintenance (O&M) of renewable energy equipment, such as solar panels, exclusively for their own use, provided the generated power is not supplied to domestic tariff areas. The solar equipment will be considered capital goods.

The ministry has directed development commissioners of SEZs to review requests from SEZ developers and co-developers to establish non-conventional power plants as part of the infrastructure, granting fiscal benefits. However, fiscal benefits will not be provided for the O&M of the solar systems. As per current regulations, SEZ and IT/ITES developers are permitted to establish units in SEZ processing areas, entitling them to fiscal benefits contingent upon fulfilling the net foreign exchange obligation. Municipal and development authorities mandated the installation of solar power systems before these units could commence operations.

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