Safeguard Duty Fails to "Safeguard" Indian Solar Cell Manufacturers

Impact of Safeguard Duty

Much hasn’t changed for the local solar cell and panel manufacturers even in the nine months after the imposition of safeguard duty on imported solar cells and panels in India. About 90% of panels used in Indian solar projects are imported because they are cheaper. There were many reasons that led to an increase in Chinese imports into India such as other countries taxing China’s solar imports, lack of adequate advanced technological manufacturing capacities in India, WTO nullifying the domestic content requirement in India and falling import prices in India.

However, a safeguard duty of 25% could not do much to improve the state of our local cell manufacturers. Solar cell manufacturers from across the country have been complaining. A few complain about a poor order book, while others say their factories are still shut. Solar cell manufacturers also said that their products remained more expensive even with the duty as the cost of an imported solar cell (with duty) is 12 cents/ watt, whereas input cost for an Indian solar cell manufacturer stands at 13.5 cents/ watt. Manufacturers are dissatisfied with the low rate and short span of duty imposition.

“If you require a certain price to break even, raising the competition’s cost to half of that doesn’t help,” said Dhruv Sharma, chief executive of cell manufacturing company Jupiter Solar. “We are operating at 40% capacity. If things don’t improve soon, we will definitely be heading to the National Company Law Tribunal (declaring bankruptcy).”

Source: Economic Times

The picture is a little brighter for solar panel manufacturers in India with production increasing to 650-700 MW per quarter after duty imposition, as opposed to the earlier production of 500 MW. The reasons for this improvement are that locally manufactured modules are now cost-competitive (25-27 cents/ watt) with the imported Chinese modules. The exchange rate volatility in the global market has also led to developers preferring Indian made panels. However, module makers also demand duty imposition for a longer time period so as to further improve their profitability. Moreover, the declining duties will compel developers to buy panels closer to the project commissioning date when duties would fall to 15%.