India’s government decides against levying duties on solar equipment imports

• In January, the government proposed a 70% safeguard duty on solar equipment from China and Malaysia.
  
• This was in response to concerns from domestic manufacturers that these imports were biting into their sales.
  
• However, the government decided against the duty, given that India’s continued progress in solar production depends on these cheap imports.

India’s solar power producers can rejoice. The government has decided against levying a 70% duty on imports of solar cells and modules from countries like China and Malaysia. An official from the Ministry of Renewable Energy, Anand Kumar, confirmed to the Economic Times that there wouldn’t be any “provisional safeguard duty”.

A safeguard duty is usually imposed on a product for a short period of time in the event that imports of the product have increased at a rate that hurts domestic producers of the same good. India’s imports of solar cells and modules, most of which came from China, rose by 43% in 2017.

In January, the government proposed a 70% safeguard duty on solar equipment from China and Malaysia, in response to concerns from domestic manufacturers of solar cells that these imports were biting into their sales. However, domestic developers of solar power projects did not take kindly to the proposal. They argued that the duty would increase their costs significantly and lead to cancellations and delays in their projects.

This led to a petition in the Delhi High Court against the duty by Acme Solar, an Indian energy company. The petition was recently withdrawn following the a decision by a government committee on safeguards against imposing the duty.

Import dependence

In line with a goal to achieve 100 gigawatts of solar capacity by 2022, India’s domestic solar power capacity has skyrocketed in recent years. According to data from the Central Electricity Authority, India had 69 gigawatts of renewable energy capacity at the end of March 2018 out of which nearly 21.7 gigawatts came from solar energy alone. This represents more than a tripling in production since March 2016.

This growth has, however, come on the back of cheap imports of solar power equipment from these countries, which comprise over 80% of the equipment used in domestic power projects. These cheap inputs have helped keep solar energy prices low.

As I mentioned in an earlier piece in March, India simply lacks the domestic manufacturing capacity to support these projects. Indian solar cell manufacturers do not have the technology to cover cost and supply chain efficiencies required to match the prices of their Chinese and Malaysian competitors.

Hence, in deciding against the 70% duty, the government has effectively realised that it can’t meet its solar energy production targets without Chinese imports. Not unless it implements a number of measures to build the capacity of its domestic manufacturers.