India could halve import taxes on solar panels and seek a reduced goods and services tax for these devices to fill shortfalls in local production amid growing demand for renewable energy solar panels, three government sources said.

India’s renewable energy ministry has held talks with the finance ministry to approve its request to cut tariffs on solar panels from 40% to 20%, said the three sources, who declined to comment.

Additionally, the two ministries may recommend to the Goods and Services Tax Board of India to lower the Goods and Services Tax (GST) on solar panels to 5% from 12% imposed in 2021, the sources said.

India introduced a 40% tax on solar panel imports in April 2022 and a 25% tax on solar cells to discourage Chinese imports, in line with Prime Minister Narendra Modi’s ambitious plans to become more self-sufficient and reduce emissions by increasing production of renewable energy.

“However, domestic capacity is insufficient… imports are needed to fill the gap,” said one of the sources.

The proposal comes as Modi seeks to achieve a target of 365 gigawatts (GW) of installed solar capacity by 2031-32, as part of a green energy campaign starting with promoting sustainable aviation fuel electric cars.

India’s Ministry of Finance did not immediately respond to an email seeking comment. A spokesman for the Renewable Energy Ministry said comments would be made as soon as possible. (Reporting by Sarita Chaganti Singh and Nikunj Ohri; writing by Aditya Kalra and Christian Schmollinger)