'Serious Injury' on account of solar cells imports: Government proposes 70 per cent safeguard duty

NEW DELHI: The Directorate General of Safeguards (DGS) has proposed 70% safeguard duty on solar cells and modules imported from China and Malaysia, citing concerns of the domestic industry being damaged on account of increasing solar imports.
“I recommend that pending a final determination, considering the average cost of sales by the Domestic Industry arrived at on the basis of import quantity ratio of Solar cells and Solar modules (confidential), a reasonable return on the cost of sales excluding interest, the present level of import duties, and the present average import prices, a provisional Safeguard Duty be imposed at the rate of 70% ad valorem on the imports of Solar Cells whether or not assembled in modules or panels,” said DGS in its preliminary report on investigation of the import of solar cells.

The move comes after a plea was filed by Indian Solar Manufacturers Association (ISMA) before the DGS claiming that on account of the surge in imports of solar many domestic producers have kept their production facilities almost idle and the heavy losses have crippled the domestic industry and therefore requested for the imposition of a provisional safeguard duty.

Part of the industry feels that this levy may end up giving the end user more pain as it is going to be a burden on the solar original equipment manufacturers (OEMs) which finally will get passed on to the end consumer. While this may help the domestic manufacturers in the short term, its sustained benefits are unlikely to be witnessed.

“The duty, if levied, will shoot up the project cost by about 40%, ultimately leading to higher solar power tariffs. Measures like safeguard duties and anti-dumping duty are protectionist in nature, and may not help even the domestic manufacturers in the long run,” said Mudit Jain, senior manager at solar consultancy firm Bridge to India.

The DGS observed that China’s huge production and excess capacities of solar cells when faced with hindrances in exports to the EU and USA, had to find an alternative outlet, which they found in India.

“The imposition of protective measures on the PUC (solar cells) imported from China into the EU and USA shifted China’s export focus towards India,” DGS pointed out.

While solar cells are imported from China, Malaysia, Singapore and Taiwan, a major quantity of the product is being imported from China. The import volumes of solar cells have increased from 1,275 MW in 2014-15 to 9,474 MW in 2017-18 (Annualized).

This is an increase of 643% in 2017-18 (Annualized) from the base year 2014-15. Moreover, there has been a sudden surge in imports volumes during the first six months of 2017-18 which is 74% of the imports in 2016-17, the report said.

“Critical circumstances exist requiring imposition of provisional Safeguard Duty immediately in order to save the DI from further serious injury which would be difficult to repair, if the application of this Safeguard measure is delayed,” the report added.

While China’s exports to India constituted a paltry 1.52% of its total global exports during 2012, this increased to 21.58% during 2016.

“The trend in import volumes strongly suggests that imports of solar cells are likely to increase in future due to excess capacity in China, export orientation of producers in China and opportunities lost by Chinese producers/exporters in other significant markets like USA and EU which would force such producers / exporters to target India,” the report argues.