Indian Dumping Duties on Solar Cells and Panels will be counterproductive and illogical

Indian solar manufacturers of crystalline solar panels and cells recently filed an application to the directorate general of anti-dumping and allied duties. The application says that the current prices of solar panels is artificial and too low without relation to the costs of the panels. Note the Indian solar companies have been trying to get duties imposed on imported solar panels for a long time without much success. However the recent decision of the US government to impose countervailing and dumping duties on imported Chinese solar modules has emboldened the solar manufacturers to seek a similar duty. However this demand is illogical because

a)      Anti dumping duty should be imposed when the prices are below costs. It is not so because the biggest Chinese solar panel companies are operating at positive gross margins even though they are losing at the net margin level

b)      Indian solar industry is not capable of competing even at higher prices and at the scale required

c)       It is questionable that India requires a domestic solar manufacturing industry given that there already exists a very healthy global industry in solar manufacturing operating at wafer thin margins. Note India does not have a semiconductor or a high tech industry but that does not mean we impose duties on imports of chips to foster a domestic industry.

Are the Indian Manufacturers afraid of competition?

Indian manufacturing possesses neither the Technological advantages  of the US and Germans nor the Manufacturing powers of the Chinese. So if the Indian government allows the import, the Indian manufacturers would become marginal players in their home market. India has ample capacities,but lot of this capacity would be idle because Indian solar manufacturing is not cost competitive compared to foreign solar producers. Chinese/Japanese/US modules are installed around the world  with 25 year power purchase agreements and they have no issues. The Indian quality requirements would not be more stringent than those required in Europe, USA and other developed markets.

The Indian Solar Companies were hoping that like the US government , India too would impose some sort of  anti-dumping duty on imports of Chinese solar cells and panels. But the government seems in no mood to oblige. Note the import duties would hurt the powerful Indian utilities and developers who need the cheap solar panels. There is some protection for the solar players in the federal subsidy scheme JNNSM but nothing for the state subsidy programs. It looks likely that most of  the Indian solar cell and panel producers will be wiped out given the current state of affairs. Chinese solar panels have virtually destroyed the solar manufacturing industry in the West with big companies falling under the relentless price pressure where solar panel prices have gone down by 60% in one year. Only the Koreans seem to be standing up to the Chinese government backed top tier solar companies from China. The rest have mostly folded up and are facing survival questions including those from Taiwan. Indian solar companies were never that big and cost competitive anyway given the headstart and support of the Chinese backed companies. The price crash in 2011 has seen most of them close their factories as they can’t even cover their costs at the Gross Margin Level.

Summary

Indian solar factories for the most part have closed down or are operating at super low utilization rates. The massive oversupply in the solar industry and the consequent price crash has made solar reach unheard of low rates of Rs 8/kwh compared to Rs 15/kwh two years ago. Solar Products in India are all set to grow at a tremendous rate in the future driven by the declining costs of solar power and the increasing price of fossil fuel energy products. It is because of global competition and innovation that solar in India has been growing at exponential rates. It is highly doubtful that the Moser Baer,Tata BP Solar could have managed such dramatic cost cuts . We  should face the facts and smell the roses. Indian industry in some sectors like Hi-Tech,Solar etc cannot compete for reasons of history,capabilities and government support. Imposing duties will only increase the prices of Indian solar panels and lead to the benefit of a few to the detriment of many.