The recommendations of the DGTR (part of the commerce ministry) for safeguard duties on solar cells import have finally seen daylight, with the finance ministry notifying the safeguard duties effective July 30, 2018, to run till July 29, 2020. The duty comes with a graded scale, being 25 percent for the first year, and then dropping to 20 percent between July 30 2019 to Jan 29, 2020. And finally, 15 percent from then on till July 29, 2020.
The duties had been recommended on the back of a DGTR investigation that found enough evidence for the ‘harmful’ effects of imports, particularly from China on Indian industry to make protection a necessity.
The Indian solar Manufacturers Association (ISMA) had originally filed an application for the duties back in Dec, 2017, pleading for duties as high as 60-70%, a level always considered impractical.
Now that the speculation is fact, it should be interesting to see the impact of the duties on solar auctions coming up. Previous auctions did not allow for any pass through of duties, so expect some contortions by players and administrators alike to ensure those don’t get stuck. A senior official at the Solar Energy Corporation of India (SECI), the nodal authority for most solar auctions in India, said that the expected impact of the duties, when they come into force, should be 25-35 paise per unit. It’s a number some industry players dispute, claiming that the impact could be as high as 60 paise per unit.
We believe that with a committed solar capacity roadmap, and the robust interest in solar at prices in the Rs 2.70 to Rs 3.20 range, there is enough demand and potential for India to ride out any disruptions from this duty imposition. And look to create some serious domestic capacity and manufacturing in the space, dominated utterly by China-based firms. As it is, the duty will apply to imports from China, Malaysia, and ‘developed’ countries, including the US, which could lead to some action at the WTO too in time. As the gazette specifically mentions that duties will not apply to developing countries, other than China and Malaysia. Can this lead to round tripping of imports through other countries? Keep watching this space for more!