Despite a significant move taken by the Indian government a month ago, to promote the power of solar in tackling climate change globally, where, India took centre stage by leading the bunch of nations from across the globe during the International Solar Alliance (ISA) founding ceremony.
India, too, is dealing with various bottlenecks on domestic front in promoting solar via its ‘Make in India’ initiative. One of the major issues that Indian solar manufacturing industry currently facing is ‘anti-dumping and safeguard duties’. Here I have tried to throw some light on the topic that split Indian solar industry into parts.
To back domestic solar manufacturing industry and restrict dumping of solar equipments from overseas, the Indian Solar Manufacturers Association (ISMA), in July last year, had filed the plea for investigation of import of solar cells and modules from countries such as China, Taiwan and Malaysia.
Also, the Directorate General of Anti-Dumping (DGAD) had started investigation on the matter. However, in March this year, the DGAD had terminated the anti-dumping probe on the back of plea withdrawn by the ISMA itself.
Whereas, the Indian solar manufacturers are still mulling over refiling a fresh plea on solar imports with the DGAD’s office demanding extension of the years of investigation to include from April 2016 to December 2017.
Earlier, the period of investigation was up to June 30, 2017 and the data available for the analysis was for three years from April 2013 to March 2016. The reason quoted by the Indian manufacturers for the extension of time period of the probe was that, the dumping has been surged drastically in the second half of 2017.
On the flip side, to provide some relief to solar manufacturers’ 70 percent safeguard duty had also been proposed by the Office of the Directorate General of Safeguards in January, on the separate petition filed by the manufacturers, on imports of solar cells for 200 days term period corresponding to the probe. However, a writ petition was filed in the Madras High Court against the levy of 70 percent safeguard duty by a domestic project developer, which later on was dismissed by the Court.
Moreover, the Madras High Court’s decision had paved the way for the levy of safeguard duty on solar imports. Now, in a next step, the Directorate General of Safeguards will resume its investigation and likely to complete it by August, 2018.
Post completion of probe, the DG Safeguard Office will send its report to the Ministry of Commerce, and then the ball will be in the Ministry’s court to levy or not to levy 70 percent duty for 200 days on solar imports recommended in the preliminary finding.
Later on, whatever will be the outcomes of both the probes! But this state of uncertainty created a chaos among the solar industry.
In my journey of exploring about this serious current issue of anti-dumping and safeguard duty, a few among the well-known veterans from Indian solar manufacturing industry, Rajendra Parakh, Chief Financial Officer, Vikram Solar; Bharat Bhut, Director, Goldi Green; and Neelesh Garg, Director, Saatvik Green Energy, discuss about their expectations as well as the concerns they hope will be addressed.*
In the absence of anti-dumping and safeguard duty on solar equipments, what are the issues or challenges Indian solar equipment makers are dealing with?
India implemented GST on 1st July, 2017 while it is a major reform, it caused some negative exte rnalities for solar sector. Solar modules are classified under 5% tax bracket under GST but many equipment’s in balance of system are classified under higher tax rate.
Although MNRE has issues a clarification on this issue but until now there is no official notification from GST council. So ambiguity over GST tax rate still exists in market.
Also Government of India implemented projects based on Domestic Content Requirement (DCR) in recent years to create a secure market for domestic manufacturers but in light of new WTO ruling Government has very little elbow room to implement DCR projects.
Solar equipment imported from overseas is competitive by price but lacks good quality. This could have serious repercussions in the future in terms of reliability and efficiency.
Solar panels have a long-term warranty period of 25 years. With emphasis on only pricing, quality will obviously take a back seat and sustaining such extended warranty periods would definitely be difficult even after five years of operation for the solar power plant developers, who may face a tough time in future in terms of warranty claims.
Though we are committed to deliver the best quality, because of lack of government support, the pricing factor is a dampener and a serious setback for the domestic industry.
The government should ensure a level-playing field if it wants to boost their ‘Make in India’ initiative.
Price competitiveness is the foremost issue faced by solar equipment manufacturers. As a fact, India still imports 88-90% of its total solar panel requirement. This gives a very limited breathing space to plethora of solar PV manufacturers in India.
The inability to compete with imported equipment in terms of price, ultimately leads to fierce competition within the Indian manufacturers for limited number of avenues using Indian made solar PV equipment.
As of now up to what extent the Madras High Court decision, on petition filed against levy of 70% safeguard duty on solar imports, provide relief to domestic solar manufacturers’ in India?
Madras High Court has dismissed the petition seeking the stay on 70% safeguard duty recommended DG safeguards in its preliminary investigation. Now Ministry of Finance will take a decision on recommendations made by DG safeguards.
Currently there is uncertainty in the industry.
Since nearly 40% of India’s total module manufacturing capacity and 60% of total cell capacity comes from SEZ based domestic manufacturers, the duty blanket safeguard duty will deal a severe blow to India’s solar manufacturing sector.
The stay granted was on the proceedings of the investigation as claimed by the petitioner that proper procedures were not followed before announcing the preliminary findings. Since, the stay has been vacated, the concerned authority will take necessary decision for the quantum and applicability of the Safeguard duty.
The Madras High Court recently dismissed the petition filed against the levy of 70% safeguard duty, (on solar imports) but the DG Safeguards will submit its final report by mid – August after which the Ministry of Commerce will take a call on this matter.
In present scenario, what are your expectations from the government on anti-dumping and safeguard duties on solar imports?
As MNRE has already issued the direction for the pass through the quantum of safeguard duty on tariff, so the rate will increase. Before the aforesaid direction we witnessed the higher tariff for the recently conducted bid of 500 MW by GUVNL which was subsequently cancelled.
Thus, imposing safeguard duty will increase the cost of deployment of solar projects, as a consequence it will delay our renewable energy targets.
It should be noted that most of the Solar module manufactures are located in Special Economic Zones so even if Safeguard duty is levied, modules cleared from SEZ to Domestic tariff Area (DTA) should not subject to the safeguard duty.
We expect the government to protect the interests of the domestic players, which will also justify the ‘Make in India’ initiative. Given the tremendous potential the solar industry offers in terms of energy transition, employment generation and sustainability goals, there are also many challenges on the way forward. Looking at this, the government should take a long term and holistic view.
We truly support the government in their decision making process. Such huge decisions with a massive impact do take time, and the fact that government is giving due importance to it, might mean that it has solid reform plan for the industry, which keeps the interest of all stakeholders in mind, and still lead to collective progression of everyone working for the solar industry.
In near future, if anti-dumping and safeguard duties on solar imports will be implemented, the tariff cost to developers may shoot up and its burden will be directly transferred to the end-user. In such a scenario, do you think solar will be as lucrative as today?
We have a tendency to think for the short term and provide knee – jerk reactions as solutions, which are effective only for that present moment.
Our country has the manufacturing capability and the potential but the policy framework to encourage domestic manufacturing (from the government) is lacking.
The government should take a two-way approach. Along with implementing antidumping and safe guard duties on solar imports, if it creates a favourable environment by introducing policies, which will help boost domestic manufacturing in India, we can also achieve economies of scale.
We should understand it as a progress cycle. The anti-dumping may increase the cost of domestically manufactured PV equipment once, but its competitiveness with imported counter-parts will finally result in betterment of Indian manufacturers, giving them resources to spend on new technology and R&D. At present, they can only do limited since the margins are thinned out by extreme foreign competition.
ADD and safeguard duties can increase the cost of solar for short period of time but one takes a long term view solar has already achieved grid parity and it will remain lucrative in coming years.