After investigation and representation from industries and various associations, the Directorate General of Trade Remedies (DGTR) has recommended imposing 25% duty on solar cells imported from China and Malaysia. According to the document released by the DGTR, the DGTR has recommended 25% safeguard duty for first year, 20% safeguard duty for the first six months of the second year and 15% safeguard duty for the next six months of the second year.
If these recommendations are accepted by the government, it is likely to lead to a sharp hike in solar power costs. It is likely to jeopardise some Some 5,000-6,000 MW solar capacity currently under construction.
However, a final decision will be taken by a committee headed by revenue secretary Hasmukh Adhia. According to sources, the panel my come out with its suggestions in a week or so.
India has envisaged adding 1 lakh MW capacity by 2022. The programme has gained momentum thanks to falling tariff.
According to Mercom, a solar market intelligence provider, solar power tariff in India has fallen by nearly 80% since 2010, hitting a record low of Rs 2.44 a unit in May 2017, on the back of cheaper equipment imports.
The domestic equipment manufacturing capacity is inadequate to support such an ambitious capacity addition programme. Moreover, local solar gear is costlier. That is why developers prefer to import solar equipment.
But if proposed safeguard duty is imposed, it could end up slowing the pace of capacity addition in solar capacity addition and derail the 1 lakh MW target, said industry experts.
Last year in June, Indian Solar Manufacturers Association (ISMA) had filed an application with the safeguard authority, claiming that imported solar cells had flooded the market, causing injury to the domestic industry. The association requested a safeguard duty to level the playing field for the domestic industry.
The Directorate General of Safeguards (DGS) in its preliminary report in January this year, upon investigating, had suggested a duty of 70% on the imports coming from China. DGS was merged with other trade remedial bodies under the umbrella organisation DGTR in May.
DGTR held a hearing of all stakeholders in the matter including ISMA, Indian power project developers and their association, exporting countries – China, Taiwan, the EU, the US and their respective trade associations and government officials.
In its final recommendation, the DGTR observed that the position of domestic industry “further deteriorated on account of continued low price of import of PUC (solar cells and modules) which continued price injury to the domestic industry, thereby establishing the threat of injury as well.”
The DGTR took cognisance of economic parameters such as market share and profitability, which sharply declined over the injury period 2014-2015 to 2017-2018 while imports have increased during the same period.
ISMA had asked for 95% safeguard duty on imports. But project developers and more than a dozen importers from China, Taiwan, Canada etc, opposed safeguards duty saying it would be detrimental to India’s solar target.
ISMA has also filed petition for imposition of anti-dumping duty on solar equipment imports from certain countries. However, the investigating authority has not yet with its findings.
The uncertainty caused by the threat of safeguard and anti-dumping duty have made investors cautious about bidding for projects, forcing utilities like Maharashtra State Electricity Distribution Co Ltd and Karnataka Renewable Energy Development Ltd to postpone bidding more than once.