The Ongoing Debate Around Safeguard Duty Imposition on Imported Solar Panels

The India Solar Industry is in a state of dilemma, with the government exempting imported solar panels from customs duty on the one hand, while thinking about imposing safeguard duties on the other.

The Indian Solar Manufacturers Association (ISMA) has proposed imposition of 70% safeguard duties on imports of solar cells and modules to the Commerce ministry. ISMA which consists of leading domestic solar companies like Adani Group, Vikram Solar, and Tata Power, are proposing these duties in order to protect the Indian solar manufacturers and thus giving a boost to the government’s “Make in India” policy.

The progress of solar development could be hampered if such duties are imposed as India is a price sensitive market (as imported solar cells and modules will get expensive if these duties are imposed). As a result, developers would be reluctant in buying imported solar products and end up buying the domestically manufactured solar cells and modules.

But there are few questions which the government needs to consider before making a final decision:

• The solar tariff in India is the lowest worldwide, if the cost component increases (with the duty imposition), the solar business might become less lucrative for the developers.
• Are domestically manufactured solar products competitive enough?
• Will these duties benefit only a handful few at the cost of masses?
• Has India achieved the technical competence and efficiency results as their large Chinese counterparts like Jinko and Trina Solar?

India has just achieved one-fifth of its full solar installation target last year. That means the country will have to ramp up its solar activities in the coming four-five years. The solar developers think the country still needs a few more years to become completely import free. The Tier 1 Chinese solar products are not only price competitive but also of superior quality. The Indian solar manufacturers, except for a handful few, have failed to exude the technical competence and manufacturing muscle as their western counterparts.

However, with all that said, I also believe that having a safeguard duty in place will definitely give an incentive for encouraging domestic solar manufacturing. Though it would pinch the Indian solar developers initially, it would encourage production in the long run. The cost of setting up a solar plant is now cheaper than installing a thermal power plant in most parts of the world. Having a safeguard duty in India will encourage domestic players to set up solar manufacturing plants in India. Many countries including China have protectionist policies in place to save their domestic manufacturing.

Another benefit from duty imposition would be safeguarding India from flooding with relatively poor quality imported solar cells and panels. Imposition of safeguard duty should not be considered on a standalone basis, instead, the government should also impose proper BIS requirements for quality checks and controls on domestically manufactured solar products along with getting technically superior quality products manufactured.

India is laying the foundation of a solar nation and all we want is the foundation to be strong!