India’s Proposed Safeguard Duty On Solar Panels Sets The Cat Among Pigeons

Safeguard Duty On Solar Panel Import in India

The Directorate General of Safeguards, Customs and Central Excise has found a preliminary case of imposing a 70% safeguard duty on the import of solar panels into India. The quantum of the duty is much higher than what would have been dreamed by the petitioners who belong to ISMA. For the last one year, the Indian domestic manufacturers who own a combined 8 GW of solar panel and around 3 GW of solar cell capacity have found themselves in a sticky situation.

With India losing the WTO case against the USA, the domestic content requirement (DCR) portion of Indian solar tenders has been removed. With Chinese module prices almost 20% cheaper than the Indian panel prices, there has been simply no market for the Indian companies. With a much larger scale, integrated supply chain and better technology, Chinese companies have captured almost 90% of the Indian market leaving almost no room for the multiple solar manufacturers.

While the anti-dumping duty case is still to come to a result, the safeguarding authority has come to quickly finding an emergency case to impose the 70% duty on Chinese solar imports. The report says that Chinese exports have been dumped into India as Europe and USA have imposed their own duties on surging Chinese imports. The share price of the Indian manufacturers has shrunk drastically in the Indian market resulting in a serious injury.

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The final duty still has to be passed but a large number of analysts and developers have come against the imposed duty. Some of the major implications are:

1)      The developers who had aggressively bid for solar projects (around 3-4 GW in the process) will find themselves unable to deliver and will have to get some sort of relief from the government from the 70% duty.

2)      The cost of the future solar energy projects may rise by around INR 1.5 crores or Rs 1-1.5/kWh leading to a total solar price of nearly INR 4/kWh. This does not seem to be too bad but the solar developers are crying hoarse that nobody will buy this power. To give some context, solar power was selling for INR 5/kWh only 1 and half years ago.

3)      The Indian manufacturers who have their factories in the SEZ may also get hurt by the duty as it is imposed on all imports. The ministry will have to protect them through an exemption as well.

On the positive side, the “Make in India” initiative of the central government will finally make some headway and force most global players to set up Indian manufacturing facilities. Most large companies such as Trina Solar, Longi, Canadian Solar etc. have announced big plans in the past without investing a single dollar. This duty will finally lead to some concrete actions on the ground with new large-scale globally competitive factories opening up.