Union Government has imposed safeguard duty of 25% on import of solar cells (whether or not assembled in modules or panels) from China and Malaysia. The move is aimed at helping domestic solar cell manufacturing sector. But it could affect existing projects dependent on cheap imports and hike solar power tariffs in India since around 90% of panels sector uses solar cells made in China and Malaysia.
Safeguard Duty is tariff barrier imposed by government on the commodities to ensure that imports in excessive quantities do not harm the domestic industry. It is mainly temporary measure undertaken by government in defence of the domestic industry which is harmed or has potential threat getting hared due to sudden cheap surge in imports.
The decision by Union Government follows long deliberation by Directorate General of Trade Remedies (DGTR), which recommended safeguard duty structure after considering application by Indian solar cell manufacturers. They had sought protection from rising cheap imports. The 20% safeguard duty will be effective for one year between July 30, 2018, and July 29, 2019. It will be reduced to 20% for six months from July 30, 2019, and further to 15% in the subsequent half year. It will not be imposed on imports from developing countries other than China and Malaysia.
Challenges for domestic industry
India’s domestic industry has around half-a-dozen makers of solar cells and modules, with total capacity of around 3,000 MW. This is hardly enough to meet country’s burgeoning demand. The safeguard duty now puts locally-made panels on par with imported ones in terms of cost. Solar Power projects now will have to revive their supply chain and make input components locally instead of importing them and put modules together here.
Domestic sector is not being fully exploited because of obsolete technology. Moreover price of solar equipment produced in the country is not competitive as compared to that of foreign manufacturers, especially Chinese manufacturers. Domestic sector needs to do lot more to be effective meet required standards as compared to imported solar cells. They also need to improve technology.