India’s Confused Safeguard Duty on Solar Panel Imports Fails to Spur Manufacturing in the Country

The Indian manufacturing industry has seen numerous bankruptcies and closures over the last few years as predatory pricing from Chinese solar panel giants led to massive price erosion for solar products. The Indian government in its usual muddle-headed policymaking failed to take cognizance in time, only focusing on reducing solar power costs without worrying about the costs of a failed industry where it had the chance of becoming a major global player on the back of a huge domestic market. Also, read after failing thrice, India looks for Alternatives to Kick Start Domestic Solar Manufacturing.

After numerous hits and misses, the government finally brought a tepid safeguard duty of 25% for two years to protect the industry which was seeing major job losses. While this has brought temporary relief to the industry who are now able to survive by serving protected segments such as rooftop and small power projects, imports from China still rule the roost, with over 80% market share. No major Indian module company out of the 100 are able to compete with the Chinese giants in the large ground-mounted utility projects. The cost and scale of the Chinese companies such as Jinko Solar, Chint, Trina Solar and others cannot be replicated by the mostly small Indian manufacturers who have been emasculated over the years by China’s ruthless mercantilist policy of demolishing all foreign competition through massive capital and policy support by the Communist government.

The last one year has failed to lead to any manufacturing expansion by Indian players as two years is too short a period for any company to base its long term plans and make a major investment, given that all protection may go. Though the ministry has said that it will bring an import duty nobody knows for sure whether it will do that or under the pressure of the strong solar developer lobby fails to protect the industry from the flood of cheap imports not only from China but the surrogate Chinese manufacturing bases in Thailand, Malaysia and Vietnam.

While the new schemes by the government such as the rooftop solar and solar pumps scheme mandate that only locally made solar cells and modules can be used, it remains uncertain of the volumes that can be absorbed as the targets remain too high to seem plausible by the local manufacturers. Only with a long term cohesive policy will long term investments be made in the sector which would not only create jobs but also lead to better energy security and reduced imports.