After seven months of intense debate between solar developers opposing the step and domestic solar manufacturers insisting on it, before the Directorate General of Trade Restrictions (DGTR), the DGTR finally decided on Monday that safeguard duty on solar panels and modules imported from China and Malaysia should be imposed for two years – 25% for the first year, 20% for the first six months of the second year and 15% for the remaining six months. It upheld the domestic manufacturers’ contention that excessive imports of Chinese and Malaysian solar equipment by developers was causing them serious injury.
Developers seemed resigned to the prospect. “This will push solar tariffs up by about 54 paise a unit in the first year, raising them to well over Rs 3 per unit, from the Rs 2.50-2.75 per unit at present,” said Sunil Jain, Chief Executive Officer and Executive Director of of leading renewable developer firm Hero Future Energies. “But this was expected. At least there is now some clarity.”
The DGTR report concluded that the domestic solar industry had indeed suffered due to “a significant increase in imports, (following which) its share of total sales of solar panels and modules has fallen from 10% of the total in 2014-15 to 4% in 2015-16 to 8% in 2016-17 and 7% in 2017-18 (up to September 2017). Acknowledging the step could lead to a rise in solar tariffs, it maintained, however, that safeguard duty was necessary to prevent “complete erosion of the manufacturing base of the solar industry in this country”. Around 90% of the solar panels used in Indian projects are imported from China and Malayasia, mainly because imported equipment comes 25-30% cheaper than locally made ones.
Some industry experts criticized the DGTR decision strongly. “The decision, even though largely in line with expectations, is going to be very damaging to the entire industry as well as to the government’s ambitious solar energy plans,” said Vinay Rustagi, Managing Director of solar consultancy, Bridge to India. “The arguments used to justify duty imposition are highly flawed. Imposition for just two years does not make any sense as this period is too small for the domestic industry to recover. In a further blow to most ‘domestic manufacturers,’ SEZ units have not been covered under the benefit. But it is the project developers, reliant on imported modules, that stand to lose the most.”
Local solar manufacturers, under the banner of the Indian Solar Manufacturers Association (ISMA) had complained to the Director General of Safeguards last December, against the large scale and rapidly growing imports of solar equipment which was crippling their own businesses. In a preliminary finding in January this year, the DG Safeguards had recommended setting a safeguard duty of 70% for 200 days on solar imports. Following a stay order from the Madras High Court, however, this could not be implemented.
Solar developers as well as the Ministry of New and Renewable Energy had argued that any such safeguard duty, by raising solar tariffs, would put a brake on India’s ambitious programme of setting up 100,000 MW of solar capacity by 2022. Representatives of Chinese, Malaysian and Taiwanese companies, the Chinese Embassy and even the European Commission had also made their representations to the DGTR, opposing safeguard duty.
Sourced :- Kaavya Chandrasekaran, The Economic Times, 17 July 2018