Has Introduction Of Safeguard Duty Helped The Domestic Module Manufacturers?

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Insolation Energy Pvt. Ltd.

India’s move to impose safeguard duty on imports of solar cells and modules last year hasn’t helped domestic manufacturers much. To protect local producers, the government had imposed a 25 percent tariff on imports of Chinese and Malaysian solar cells and modules for the first year starting July 30, 2018, and 20 percent and 15 percent for the two subsequent six-month periods, respectively. This came after the Directorate General of Trade Remedies, a unit under the Ministry of Commerce, said that solar panel imports had caused “serious injury” to domestic manufacturing.

One and a half year after India imposed an additional import duty on solar cells and modules to stimulate local production and reduce dependence on imports, no new domestic manufacturing unit has been set up.

Before it was imposed, around 90% of solar panels and modules used in local solar projects were imported, mostly from China and Malaysia, as they were cheaper than locally manufactured ones.

The imposition of safeguard duty has not changed the situation.

“Share of imported modules in utility scale solar still hovers around the 90% mark, consistent with the preceding years, as per the recent weekly report on the solar industry.

The report noted that local manufacturing remained in dire straits. “Most of the cell manufacturers have indeed shut down and module manufacturers are operating at low capacity utilisation .

But despite the tariff, imported solar panels and cells were still nearly 10 percent cheaper than locally made modules, The import duty increased the price of Chinese solar panels to 26 cents per watt against the domestic cost of around 28 cents per watt.

While import of solar cells and modules from China have declined since the duty was implemented in July 2018, India still imported $1.9 billion worth of panels in the 11 months ended June 30, according to government data compiled by BloombergNEF.

Even after the imposition of safeguard duty, the demand for local solar panels has not increased and manufacturing capacity in the country is still the same. According to NIMMA(North India Module  Manufacturing Association), the current installed capacity is 10 GW for solar modules and 2.5 GW for solar cells.

“Also the Manufacturers in SEZs enjoy all privileges and export advantages compared to Domestic Tariff Area (DTA) units. These SEZs don’t pay the export duty, GST, electricity charges, and are not even paying safeguard duty but are selling in India. The DTA units pay GST, safeguard duty, and GST on safeguard duty, and our working capital gets blocked. This has created a huge imbalance in India. The price gap between SEZ and DTA unit prices of modules is ₹1-1.5 ($0.02)/W. SEZs need to pay safeguard duty on imported cells and modules but are not paying.”

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