With Phased Duties on Solar Imports, Government Hopes for Orderly Transition

At his press conference today, Power Minister R.K. Singh confirmed that duties, possibly starting at 25 percent, will be imposed on module imports from August 1. He wasn’t absolutely certain on duties for cell imports, but indicated they would be treated at a lower rate, possibly 15 percent. It is also not clear if customs duties on imports may be spread wider this time, beyond China and Malaysia as was done in the case of the safeguard duty. Without a clear case for dumping, doing that again might not be as simple. Besides, with China-based firms able to supply from plants in Vietnam, Singapore etc, it also may lead to leakages in the original intent.

What is interesting is the plan to raise duties to almost 40 percent after one year on modules, and 30 percent on cells. While a formal announcement with details is awaited, this is broadly in line with what we have been predicting for sometime now. By starting off duties at a lower rate, the difference would be minimal with existing charges, like the safeguard duty at 15 percent. More importantly, the intent to increase duties gradually makes it clear that the government will do what it can to encourage domestic manufacturing  in the meantime.

While Adani Solar, with its 2 GW manufacturing commitment is the only player currently, which has a clear plan in place for expanding manufacturing, it will be important for the solar ecosystem for more players to get into the business. Anything over 20 percent protection from imports is a massive advantage, after taking into account freight and other costs, and a lac of interest despite this would be frankly inexplicable.

the lower duties on cells is also understandable, as cell manufacturing is a much more complicated and capital intensive process. Almost 100 percent of the existing capacity in the country, especially among smaller firms, is in module manufacturing. Duties on ingots and wafers, which have not been indicated, will presumably stay low or even zero, as India produces almost none of those.

During his discussions with the media, Mr Singh indicated that duties on solar cells might move to 30 percent after a year, indicating a strong hope to see some steps in manufacturing those too.

The minister also remained adamant that the 175GW target for renewable energy, set for end 2022, will be met.

While the optimism is welcome, and his feisty defence of the proposed amendments to the electricity act were also convincing, it remains to be seen if India’s manufacturing dreams actually take shape over the next 28-24 months. Failure to do so will not only make solar power more expensive, it could also add to the end consumer cost, as RPO’s make a higher share of solar mandatory after the act is passed. For Chinese firms, the situation post 2021 is becoming quite clear. Either invest in manufacturing in India, or consider the viability of their India business anew.

Interestingly, we have not heard much on the impact of assemble in India versus make in India. That remains an opening global manufacturers could yet exploit after due clarifications, as the government in its Union budget clearly indicated that even assemble in India will be an acceptable solution in cases. In solar modules particularly, besides solar inverters, that is a relatively easier way to sidestep possible duty impact. We should know soon enough on the actual plans.

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Prasanna Singh

Prasanna Singh

Prasanna has been a media professional for over 20 years. He is the Group Editor of Saur Energy International

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