It is common knowledge that Chinese suppliers have been selling modules in India at prices lower than in China and that has, in fact, caused financial injury to manufacturers in India. Therefore, the procedural case for imposing anti-dumping duties is easy to establish.
Even in 2014, the Directorate General of Anti-dumping Duties (DGAD) had recommended imposition of duties but a political intervention prevailed over procedural logic. The government’s strategy at the time was summarized by the then minister as follows – India will support existing manufacturers through domestic content requirement and the additional cost arising out of the difference in module pricing would be funded through viability gap funding for project developers. The government reasoned that supporting existing manufacturers would highlight government’s commitment to the sector and it would help attract new investments. The minister realized that India needed manufacturing at scale but argued that leaving existing small manufacturers in a lurch would send out the wrong signal. He argued that if the domestic demand grows to 5-6 GW a year, there will be an economic case for large scale manufacturing to come to India.
However, this strategy has only been partially successful. India did get a lot of interest for setting up of new large manufacturing capacities but only Adani managed to put down the money. Flip-flops around the solar specific manufacturing policy weren’t very helpful. Several investors were looking to set up manufacturing in India around 2015. Their objective was to cater to the growing domestic market and also circumvent duties against Chinese and Taiwanese supply to the US. When India announced its intention to provide incentives under a solar specific manufacturing policy, companies put their investment decisions on hold and opted to wait. After a long wait, when they realized that the government has dropped its plan, they either opted for other manufacturing locations in south-east Asia or their investment decisions went into a limbo.
Now, we have come a full circle. The arguments for and against anti-dumping duty are the same as they were back in 2014. Those against anti-dumping duties argue that its risks outweigh the benefits. They say that while there is no guarantee that new manufacturing investments will be made but argue that there will surely be an increase in project cost, which will lead to lower capacity addition and result in job losses.
Those for anti-dumping duties mostly highlight the merits of domestic manufacturing in general.
However, unlike last time around, there is more sympathy within government for imposition of anti-dumping duties. Cost of solar power has crashed to INR 2.44/kWh and even for a recent DCR tender, tariffs reached INR 3.15/kWh. At such tariff levels, the government seems tempted to protect domestic manufacturing at the cost of causing a 12-18 month disruption in the market.
Global demand-supply situation may also have a bearing on the Indian government’s thought process. The US is on track to impose safeguard duties and that will likely lead to a contraction in supplies to the US and potentially create another global supply glut. Such a situation can lead to further dumping in the Indian market.
Both the above stated factors mean that the probability of India imposing anti-dumping duties by this time next year is fairly high.
In such a situation, is there a case for another political intervention? Lower equipment costs can lead to significant job creation, especially in distributed solar segment. Empirical evidence shows that downstream job creation is much larger than job creation in solar manufacturing, which is largely automated. Job creation, attracting private investments and achieving renewable targets are all important objectives for the government. Would the government take a punt and disrupt the installation market to try and attract new investments in manufacturing at a time when there is expected to be a global oversupply?
The decision is for the politicians and not the investigators to make.
Author: Mr. Jasmeet Khurana, https://www.linkedin.com/in/jasmeet/