India imposed 25 per cent safeguard duty on solar cells imports. What kind of potential will it generate for domestic solar cells manufactrers?
The duty imposition would not help the manufacturing units much as the domestically manufactured cells or modules are technologically uncompetitive as they are less efficient and are not backed-up by insurance. The first and the foremost step is to develop latest
technology with high efficiency modules.
What challenges will it create for the solar sector?
This would create hurdle in achieving the timely commissioning of the ongoing projects as the modules are under transit or are lying unclaimed at the ports since developers are not in position to bear the additional cost burden. This would ultimately impact the overall target of achieving 100 GW under National Solar Mission. One of the immediate solutions is to exempt the already awarded projects from the payment of the duty.
How will this move of the government impact the country’s solar sector?
The solar sector is still in development phase and has to achieve 100 GW installation by 2022. Majority of the domestic demand is met via imported modules since the domestic supply is not enough to cater the entire national demand. Therefore, the imposition of
safeguard duty would lead to additional cost burden on the developers. Further, the tariffs are likely to increase by approximately 50 paise per unit. This would shoot up the tariff rates beyond Rs 3 and as a result DISCOMS would refrain from buying the power. Ultimately, this will have a negative impact on the sector as a whole.
Will the country achieve the target of 100 GW of installed solar energy by 2022 with the imposition of safeguard duty on solar cells?
As per one of the recent reports by CRISIL, India will not be able to achieve its ambitious target of generating 100 GW solar power by 2022.
What are the solutions to remove the ambiguity created due to this imposition of duty?
The ongoing projects should be exempted from the safeguard duty or allowed a pass through. The ultimate solution is the withdrawal of the duty.
Why have the Indian manufacturers failed to scale up, upgrade plants or integrate backwards?
The domestic manufacturers are not globally competitive, majority of the manufacturing capacity is not using latest technology. India presently manufactures two stages from wafer to cell and cell to module which are basically assembling units. The Government is coming up with domestic manufacturing policy to promote fully integrated value chain from silica to module. This would definitely provide a boost to the domestic manufacturing.
So, has the government created a trade barrier to support domestic manufacturer?
The Government has adopted two different approaches for promoting domestic manufacturing and creating trade barrier by imposing safeguard duty; which cannot be mixed together. In order to promote domestic manufacturing, the Government is coming up with domestic solar PV manufacturing policy and has already released RfS of 5GW manufacturing linked PPA. Whereas it is difficult to say that whether the duty imposition will protect the existing manufacturers as the notification is not clear regarding the manufacturers located in SEZ.
Lastly, how badly private rooftop solar and open access market would be hit by duties?
The rooftop segment would equally be impacted by safeguard duty with the increased cost burden. Further it would become difficult to sell power in the open market due to increase in total project cost.
