ECONOMYNEXT – Batteries for solar power are hit with 46 percent in taxes at the point of import making them expensive in Sri Lanka compared to other countries, the island’s renewable energy industry group has said.
Sri Lanka’s Ceylon Electricity Board has announced a 45.80 rupee a unit tariff for solar batter energy stored during the day and discharged into the grid between 630 pm and 1030 pm.
But the taxes increased the capital cost of batteries artificially the Federation of Federation of Renewable Energy Developers (FRED) said.
The import duty was around 25 percent, there was 5 percent para tariff called port and airport levy and value added tax of 18 percent.
Because electricity is not under Sri Lanka’s value added tax regime, the developers cannot recover the VAT unlike in other sectors by invoicing the CEB, FRED officials said.
At one time solar power inputs were free of some taxes but after the economic crisis, industry officials said but after last economic crisis the tax exemptions were tightened.
Unlike in export-oriented countries in East Asia like Vietnam and Singapore, electricity is not charged VAT in Sri Lanka for reasons that are not clear.
The renewable energy developers therefore gets stuck with the VAT as a capital cost. Some large FDI projects however get VAT relief up front.
Based on information available, the CEB is planning to give only 10 years for the battery tariff, compared to a 20-year Power Purchase Agreement, FRED officials said.
“So in order to make it commercially sensible, it has to be 20 years,” a FRED official said.
“And the batteries are now available in the storage battery with about 12,000 cycles. We can use more than 15, 20 years.”
The FRED is also protesting a recent reduction in feed-in-tariffs for renewables from June, which they say will discourage private developers.
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The feed-in-tariffs were decided by a committee and approved by the cabinet of ministers. While the renewable developers made representations, they have not been adequately taken note of, FRED officials said.
Especially in rooftop solar, feed-in-tariffs have been successful in getting about 1,700MW of rooftop solar, while competitive bidding have not, FRED said. (Colombo/June28/2025)
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