India’s government may offer the domestic solar manufacturing industry some protection

The newest recommendation by India’s Directorate General of Trade Remedies (DGTR) has stated that a 25% safeguard duty should be implemented on solar cells that come into the country from China and Malaysia.

The request actually came in from the domestic industry. Stakeholders from the industry say that without at least an interim safeguard duty in place to protect the manufacturers, there would be ‘irreparable damage’.

Concerns

The conclusions published by the DGTR were ascertained after analysing the interests and submissions from over 200 entities. The primary concern was that a blanket safeguard duty is against the interests of the indigenous manufacturers who operate out of Special Economic Zones (SEZs).

According to the concerned parties, since 60% of solar cell and 40% of the module manufacturing facilities fall under SEZs. A safeguard duty would actually be counterproductive because SEZs are essentially treated as duty-free zones and foreign territory for trade.

The official statistics from the Ministry of New and Renewable Energy (MNRE) suggest, there are only 20 manufacturers of solar cells and 117 manufacturers of solar modules in India. Considering that the country’s government is aiming to install 100 gigawatts (GW) of solar power grids by 2022, the current domestic industry only needs 10% of the annual demand.

Therefore, though the domestic industry may benefit in the short run, in the long run the measure can potentially create a demand-supply gap.

The opposition states that rather than an influx of imports, the domestic industry is lagging because there is no manufacturing base for polysilicon, ingots and wafers. This leads to a lack of setup, absence of economies of scale and obsolete technologies.

Justification

According to the DGTR’s conclusions, there has been a significant increase in imports, in absolute terms and also relative to domestic production. Over 2014-15 and 2017-18, market share and profitability have slipped and imports have consistently increased.

But keeping the concerns of everyone in mind, the safeguard duty will also be rolled back in a phased manner.

Since, the imports from other nations don’t exceed 3% individually and 9% collectively, the safeguard duty is also only specific to imports coming from China and Malaysia.