The crucial obligation to protect domestic manufacturers of solar cells and modules in India against imports from the People’s Republic of China, Thailand and Vietnam will end on July 29, 2021. Until tariffs base start from April 1, 2022, a non-service period has affected manufacturers. Project developers wish to take advantage of this rare tax-free period to accelerate their acquisition of modules.
The story of two duties
The 25% safeguard duty, announced on July 30, 2018, was imposed on imports of solar cells and modules from China and Malaysia. The 25% duty for the first year was gradually reduced from the second year, with the rate reduced by 5% every six months until its end in July 2020.
In July, the safeguard duty was extended and applied to imports from China, Thailand and Vietnam. The duty was set at 14.90% from July 30, 2020 to January 29, 2021 and at 14.50% from January 30, 2021 to July 29, 2021.
Last week, the Ministry of Trade and Industry said the Trade Remedies Directorate (DGTR) had launched an anti-dumping investigation into imports of solar cells from China, Vietnam and Thailand. It will take a few months for the DGTR to submit its recommendations.
While the government’s protectionist measures aim to protect domestic manufacturers, the industry seeks a balance in the process so that the interests of all stakeholders in the solar supply chain are preserved.
The question everyone is concerned about is whether the safeguard duty will be extended until the BCD takes effect or whether there will be a duty-free window after July.
Speaking on the Duty Free Window between August 2021 and April 2022, Bharat Bhut, Co-Founder and Director of Goldi Solar, said: “This window offers Chinese manufacturers an exclusive opportunity to deposit their modules in India at very low prices and offers that developers will also find difficult to resist. At the same time, duties on imports of raw materials will continue to be collected. “
“The Covid-19 pandemic has already had a negative impact on the home solar manufacturing industry, with raw material prices and transportation costs skyrocketing. We also face supply chain issues and poor investor sentiment. Without government intervention, we run the risk of shutting down units and losing nearly 300,000 jobs. It could also cause the industry to stop in its tracks or push it back for a decade. We ask the government to extend the safeguard duty or introduce a provisional duty. The future of the domestic manufacturing industry depends on the government’s decision, ”Bhut explained.
China accounts for more than 80% of module supplies in the country, and Indian module manufacturers are struggling to compete with competitive Chinese prices.
Vinay Pabba, founder of VARP Power, said: “This may not be speculation anymore. The DGTR has just opened an anti-dumping investigation into the importation of solar cells from China, Vietnam and Thailand. If this materializes, at least for those countries, the safeguard duty will be replaced by some form of anti-dumping duty. So in all likelihood we can see either of two things happening. Either a provisional extension of the safeguard duty until April 2022, or an anti-dumping duty instead of the safeguard duty for certain countries. “
Many believe that such protectionist policies are necessary to incentivize the domestic manufacturing sector. While others differ and have a completely different point of view on the subject.
Encourage not to penalize
“I have long believed that creating tariff and non-tariff barriers is the wrong way to go to encourage home solar generating capacity. Ultimately, these are all indirect taxes, and the most disadvantageous feature of indirect taxation is the lack of equality in its impact. Indirect taxes are regressive. All of this will generate revenue for the Treasury and a higher electricity rate for everyone. It is not a very desirable outcome if it starts to tip the energy economy in favor of coal – which can potentially block our ambitious energy transition agenda, ”added Pabba.
“The government has several other policy tools to encourage the domestic manufacturing industry such as investment subsidies, interest subsidies, the goods and services tax and other tax breaks, concessional access to land and electricity tariffs, among others. We can even think of extending a price preference in auctions for developers offering modules with national content. Considering the multitude of options, I think we made the wrong policy choice by increasing tariffs to 25% and 40% for solar cells and modules without looking at other policy options, ”Pabba said.
Although no official announcement has been made by the government, stakeholders appear to be in the dark about the post-July law and its impact on the domestic manufacturing segment.
MSMEs will be victims
Speaking to Mercom, Avinash Hiranandani, CEO and Managing Director of RenewSys India, said: “Between August 1, 2021 and the imposition of BCD next year in April, we could have a void. There should be some form of restriction or barrier during the period. Otherwise, the solar supply chain will take a beating. Some form of safeguard duty should be implemented to ensure that Indian manufacturers are not hit hard. Chinese mods will become 15% cheaper and it will be easier for them to dump their products cheaply in India. If the barriers are removed, it will be virtually impossible to compete with Chinese manufacturers. “
“Developers won’t be greatly affected by this as they have enough time to strategize until the BCD goes into effect next year. Small manufacturers and micro, small and medium enterprises will be the most affected. The second wave of the Covid-19 pandemic further complicated the situation. The government should take a benevolent approach in light of the Covid-19 pandemic and extend the validity of the duty to safeguard instead of lifting it completely. Protection should be there in one form or another, ”Hiranandani noted.
The imposition of various duties by the government is an attempt to intensify the domestic manufacturing segment and prevent imports from other countries.
Optimism of duty
Emphasizing the need for homework to safeguard the interests of Indian manufacturers, Dhruv Sharma, CEO of Solar jupiter and the President of the Indian Solar Manufacturers Association, said: “We have made requests in the appropriate forums, but we have not yet received any comments from the Ministry of Commerce or the Ministry of New and Renewable Energy. Authorities say they need more time to assess the situation. We are not very optimistic but hope for the best. The matter is duly considered. We asked for the safeguard right to be extended. We also filed for anti-dumping duties. “
“If the deadline is not extended, it will be a blow to the Indian manufacturing sector. The market would be inundated with Chinese imports. Manufacturers will have to close workshops for the next eight to nine months and wait for the BCD to kick in. Manufacturing is an ongoing process. It is only after four to five years that the results begin to show, and if you do not support them for nine long months, Indian manufacturers will suffer significant losses. This will reduce their competitiveness. Gaps between policies will make all the hard work unnecessary until the next viable policy kicks in. They should either extend the safeguard law or have an anti-dumping duty in place at least until BCD comes into effect ” Sharma added.
Duties to counter imports
Anti-dumping, safeguard and countervailing duties are generally used by the domestic industry to counter imports. Each of them is unique.
But a backdoor restriction on imports can come in the form of ALMM.
The government has been strict on mandatory registration of solar module manufacturers under the Approved Model and Manufacturer List (ALMM). Only models and manufacturers included in the list will be eligible for government projects such as SECI and NTPC. None of the foreign suppliers who paid for the ALMM have been registered because their manufacturing units are not physically inspected, and it may take another year for this to happen. Why such an important policy is implemented knowing that travel is dangerous amid COVID-19 is a question for the government.
Rakesh is a journalist at Mercom India. Prior to joining Mercom, he held numerous positions as Business Correspondent, Assistant Editor, Senior Content Editor and Sub Editor at bcfocus.com, CIOReview / Silicon India, Verbinden Communication and Bangalore Bias. Rakesh holds a BA in English from Indira Gandhi National Open University (IGNOU). More articles by Rakesh Ranjan.