The case for and against safeguard duty on solar module imports from China

Last year, solar tariffs in India touched an all time low of Rs 2.44 Per unit i.e. 4 cents per kWh. This tariff was lower than coal at Rs 3.20 Per kWh, as reported by Economic Times .Experts said that a major reason for the fall in tariffs was availability of cheap solar modules from China.

On 5th January 2018, Directorate General of Safeguards Customs and Central Excise (DGS) recommended a 70 % provisional ‘safeguard’ duty on Solar Module/Panels imported from China, Malaysia and Taiwan. This news was received with much criticism from the Solar Developer community.

Since the news about the recommendation on ‘safeguard’ duty has come in, speculations are rife that Solar tariffs will rise again.You should know that solar modules account for nearly 60 % of the project cost so a change in price of module will impact the cost of production greatly. An article in  Business Line  quotes a Crisil Ratings Spokesperson talking about the impending rise in tariffs “The 70 per cent safeguard duty proposed will also inflate project costs by 25 per cent and crank up the viable tariff to Rs. 3.75 per unit from around Rs. 3 estimated earlier, making solar power less attractive to discoms. That would also be more than the average power purchase cost of 10 out of 14 discoms last fiscal.”

The most upsetting facet of this recommendation is that it puts to risk projects worth Rs 12000 Cr (and around 4 GW) as reported in the same article. These projects were auctioned in 2017.

We certainly hope that if the approval does come in for the DGS recommendation then the projects auctioned in 2017 are spared from the import duty.

Now, every coin has two sides. While the Solar Developers are unhappy with this recommendation, the domestic solar panel manufacturers are praying for an approval from the Finance Ministry.

According to the Preliminary Findings published by DGS, just about 53% of the production capacities of domestic solar manufacturers was utilized upto Sept, 2017. The finding is not surprising because Indian manufacturers held just about a meagre 10% market share in India.

As you may have guessed, employment in the domestic industry has taken a hit. The DGS report mentions how employment is on the decline when it should be rising. The same report also explains how a price cut by Chinese Imports has stopped Domestic Manufacturers from fixing a price that would help them break even. All-in-All, the last few years have painted a dreary picture for domestic manufacturers, while the country was going Ga-Ga over falling solar tariffs.

The Report emphasizes that a decrease in export of Chinese Solar Panels to USA &  EU has led to a surge in Chinese Exports to India. In H1 2016, China was exporting 18.51% of its solar modules to India which grew to an astounding to 38.77 % by 2017 H1. If this figure surprises you then hold your breath right there, China’s exports to USA and EU fell from 30.65 % in 2016 H1 to a minuscule 5 % in 2017 H1.The anti-dumping duty and countervailing duty  in USA against Solar Imports and Protective Measures in EU have channelized China’s energies to capture the Indian Market.

The Final question is that who should the government side with? Developers or Manufactures? Why don’t you tell us in comments.

Sources –

One thought on “The case for and against safeguard duty on solar module imports from China”

  1. 1. With domestic module , when we can generate power @3.2 / kWh, which is same for coal power price, why we need Chinese module anymore ? why can’t govt give a chance to domestic manufactures to create quality jobs in engineering , production , R&D activities to have a control on solar technology for sustainable energy source of the future ?

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