Govt may extend safeguard duty on Chinese solar power equipment

The government is planning to extend the safeguard duty imposed on imported solar power equipment from China, sources said. 

Domestic solar equipment manufacturers have met Union Commerce and Industry Minister Piyush Goyal and suggested the duty be retained. This comes at a time when the safeguard duty impacted addition in solar power generation capacity over the past two years. 

The domestic manufacturing industry has argued China was actively looking to divert major export flows en-route to India after major buyers from the US cancelled bulk orders. The Donald Trump administration has ratcheted up tariffs on Chinese imports, especially in the electronics space, with Washington DC threatening in December that more restrictions might follow soon.

With India being one of the few major markets seeing a demand for solar power, Beijing would flood the market if safeguards were removed, they have said.

In 2018, the government announced imposition of safeguards duty on solar cells and modules for two years — 25 per cent in the first year, 20 per cent for six months and, thereafter, 15 per cent. Apart from Malaysia, the duty specifically impacted the exports coming from China, as more than 85 per cent of India’s solar capacity is built on Chinese panels.

However, the Directorate General of Foreign Trade (DGFT) is yet to take a call on whether existing duties on Malaysia will be extended, an official said. Similarly, duties may be put on other nations from which imports have seen an unnatural spike.

Interestingly, while Malaysia used to be a dominant player earlier, imports from the nation have trickled to a bare $3 million now. In its place, Vietnam has become the second-biggest country of origin shipping $117 million worth of equipment. Trade officials revealed investigations were being conducted on whether these shipments are originally from China and are being routed through Vietnam. Electronic makers from China routinely take advantage of India's liberal trading arrangement with Vietnam, a DGFT official said.

In the past one and a half years, imports of solar cells and modules have come down drastically. Imports of cells, pegged at $2.15 billion in 2018-19, have gone down to $1.4 billion in the current financial year up to November. Cell imports had peaked at $3.83 billion in 2017-18.

Source : Commerce department

The paper recently reported India’s solar power target took a back seat because of imposition of safeguard duty on imported solar panels. Due to the uncertainty over the panel cost and final rates of power sale from their projects, many developers stalled the purchase of imported panels. 

For 2018-19, the tendering target set by the ministry of new and renewable energy was 30,000 Mw. Ongoing tenders total up to 26,000 Mw and none has been closed yet due to lack of bids.

“Till June, no one purchased panels as they were fighting legal cases to pass through the increased cost due to safeguard duty. Now, they are waiting for the safeguard duty to get over. The gap in procuring solar panels is showing on overall target. There is a deficit of 5,000-10,000 Mw in the projects slotted for this year,” a senior sector executive said.

India has set target of 100,000 Mw of solar power production by 2022. The current solar power capacity stands at 30,000 Mw.