India’s solar energy sector has experienced rapid growth over the past months. Today, it stares at a new safeguard duty on the import of solar panels, which could increase power tariffs as well as the cost of ongoing solar projects.
The Ministry of Finance has imposed a safeguard duty on the solar panels imported from China and Malaysia, and has notified the Directorate General of Trade Remedies (DGTR) about this. The duty came into effect on July 30, 2018.
The step was taken following a petition filed by domestic solar panel makers in December 2017, who were seeking protection from the rising imports from these conutries. Consequently, a steep 70 per cent duty on imports was recommended by the Directorate General of Safeguards under the finance ministry in January 2018.
In July 2018, the directorate brought the proposed tariff rate down to 25 per cent. Even this was challenged by a few solar power developers in the Orissa high court, which passed an order against any such duty being imposed till August 20, 2018.
The duty recommended by the Directorate General of Trade Remedies will apply for two years on imports from China and Malaysia. While this duty will be 25 per cent in the first year, it will be reduced to 20 per cent for the first six months in the second year, and to 15 per cent for the following six months.
India imports about 85-90 per cent of its solar panels from China and Malaysia. The new import duties have been introduced on the grounds that such imports were causing ‘serious injury’ to domestic solar panel manufacturers.
However, based on the analyses of submissions by interested parties, the DGTR has recommended that no duty should be levied on imports from other developing countries.
The move has been opposed by several solar power developers on the grounds that the higher tariffs on solar modules will leave them with no option but to pass on the extra charge to discoms and, ultimately, the consumers. This in turn might slow down India’s ambitious solar programme, which aims to have 100GW of solar capacity by 2022. They state that local solar panel manufacturers do not have sufficient capacity to meet their needs.
Solar power tariffs are currently on par with thermal power tariffs. The safeguard duty is expected to raise the solar power tariff by at least 50 paise, the developers state. According to analytics, research and ratings firm, CRISIL, the safeguard duty is both a boon and a bane for the solar value chain. CRISIL has stated that, on the one hand, this duty provides an opportunity for the domestic solar panel industry to flourish. But the duty will also raise the capital costs for solar projects that are dependent on imported panels by 15-20 per cent. So the safeguard duty may lead to higher domestic solar power tariffs, as a bulk of the projects are already under implementation.
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