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Anti Dumping Duty: Future of Renewable Energy Sources in India

Jan 12, 2018 6:25 PM 3 min read
Editorial

A key Finance Ministry Department report investigating the dumping of solar cells recommends a “safeguard” or anti-dumping duty of 70% for a period of 200 days on solar imports from China.

 

Annual import volumes of solar cells have increased from 1,275 Mw in 2014-15 to 9,474 Mw in 2017-18. The increased quantity of cheap imports is making the domestic solar manufacturing industry unviable and irrelevant.

 

The investigation was undertaken following a petition filed in July 2017 by the Indian Solar Manufacturers Association (ISMA), pushing against the import of solar equipment from China, Taiwan and Malaysia. Manufacturers claimed that the market share of domestic players has progressively deteriorated from 13% in FY15, and is estimated to further decline to 7% in FY18.

 

Previously the Ministry of New and Renewable Energy (MNRE) had also released a concept note pushing for enhancement of India’s indigenous capability to produce solar PV modules, cells, wafers and other panel equipment.

 

Conclusively, the onus on the state is to convert from a net importer country to a net exporter country for solar PV equipment and become a global player in solar manufacturing.

 

Levying import duty on solar cell imports may be a step in a right direction, but an inadequate one without the development of domestic infrastructure to support renewable energy sources and requirements of the country. Moreover, it needs to be duly noted that much of the growth in this sector – about 900% in last three years – has been largely due to the sharp fall in costs owing to cheap imports. Any uni-dimensional imposition of import duty can have adverse effect on the ongoing import-driven projects, impacting their costs and viability. 

 

The present maximum solar cell manufacturing capacity in India per year is only around 3 GW against an average requirement of 20 GW. As a result, the remaining is to be procured from international market. Therefore, import of solar cells remains a necessity for India.

 

Installed capacity in India is limited to cells and modules. The upstream stages of the manufacturing chain which includes inglot/wafers and polysilicon have not yet been tapped into. Even the existent capacity lies underutilized because of technology now considered obsolete. Very few domestic players have attempted to venture into superior technology. Absence of an integrated set up, economies of scale & modern technology often results in higher cost of production.

 

While there have been a few disparate attempts by the government to improve the current state of solar cell manufacturing in India, these remain mostly inadequate.

 

MNRE has initiated various schemes to promote Domestic Content Requirement (DCR), i.e. local sourcing of components. However, according to a recent ruling by the World Trade Organization (WTO), any future DCR solar projects can be set up only by government organizations and not by private developers. This further discourages domestic and private players from taking any initiative.

 

Any blanket imposition of duty has a potential to cause blunt-force trauma to the consumer cycle, primarily due to a considerable increase in the price of inputs.

 

A report by Bridge to India notes that modules contribute to approximately 60% of the total cost of solar projects. A duty of 30% would increase project cost by 18%, or INR 895 million for a 100 MW project. In such a scenario project returns are expected to fall significantly. Moreover, imposition of any anti dumping duty in solar should not hamper the existing pipeline of projects.

 

The government needs to strike a delicate balance between demands of manufacturing and ongoing development activities. If domestic manufacturers are not adequately compensated for the extra cost, with little financial cushioning, many of the projects under construction run the risk of abandonment. Announcement of import duties alone is unlikely to have any enduring benefits for domestic manufacturers without the constitution of a structured plan to finance and support the targeted solar capacity.