Looming Uncertainty Over Indian Solar Industry: Proposed Safeguard Duty On Imported Solar Cells
About the proposed blanket safeguard duty on imports of solar panels and cells and its impact on solar project cost, presented by Insolergy.
In a move that may curtail the ongoing growth of adoption of Solar Energy in India, the Directorate General of Safeguards (DGS) [Customs & Central Excise, Ministry of Finance] has proposed 70% safeguard duty for an initial period of 200 days, citing “serious injury” to the domestic industry on account of increased imports of Solar Cells (whether or not assembled in modules or panels) manufactured in China [for detailed report, read Preliminary Findings DGS dated 5th January 2018].
The proposal has been made after Indian Solar Manufacturers Association (ISMA) had filed a petition under Rule-5 of Customs Tariff (Identification and Assessment of Safeguard Duty) last year on 5th December 2017. The preliminary findings indicate that the domestic industry is experiencing significant losses and increasing unsold inventory due to cheaper imports specifically from countries like China and Malaysia. The examination of data between FY 14-15 to FY 17-18 (Est.) indicates, that although the domestic production has increased 4.7 times, the relative % of domestic production has reduced from 16% to 10% during the same period due to increased import.
While the move is expected to alleviate the financial challenges of domestic manufacturers, thus bolstering the governments Make in India efforts, the increased cost of solar cells may invariably cause project costs to rise, which poses threat to the government’s target of installing 100 GW of Solar Photovoltaic Plants by year 2022. The initial estimates vary, but it is expected that this will cause project cost to go up by around 30% to 40%, resulting in increase in tariff by around Rs. 0.9/kWh in the industry, which has seen tariff as low as Rs. 2.44 /kWh in recent auctions. Furthermore, under present framework, the domestic manufacturers operating out of SEZ (Special Economic Zones) may also come under the ambit of this duty, thus making this exercise counter-productive. It is to be noted that the safeguard duty is compatible with norms of World Trade Organization (of which India is a member state) allowing countries to impose same to protect domestic industry against “serious injury” or “threat” thereof, for a limited time period.
It is worth highlighting that similar petition has been filed by Indian Solar Manufacturers Association at Directorate General of Anti-Dumping and Allied Duties (DGAD) [Ministry of Commerce] last year in July 2017, for which the Oral Hearing was concluded in November 2017. As per a leading Solar Industry consultant Bridge to India, the provisional duty is anticipated in Q1 2018, and the anti-dumping duty will come into effect in Q3 2017. According to Bloomberg, the anti-dumping duty is expected to be 7.5% on imported Solar Panels, thus increasing the overall project cost by est. 4.5%, however there has been no official release of the figures yet. As per the article published in Economic Times, the Ministry of New and Renewable Energy (MNRE) is intending to take “judicious view, considering domestic manufacturing capacity and requirement” to achieve target of 100 GW by year 2022.
With rising demand for cleaner energy and financial woes of domestic manufacturers, the government is certainly seeking to balance the two sides. It is not yet clear what the outcome these two petitions will be, but the looming uncertainty over the Indian solar industry is not at all conducive to its growth.