Have FTA Routes Become Conduits For Cheaper Solar Modules into India?

Export-related data has revealed that during April and May of this fiscal year, the quantum of imports of solar modules from countries with which India has a free trade agreement (FTA) has increased significantly, with a 48% share of total solar imports. The sharp move is beginning to hurt domestic manufacturers yet again, as they complain that these could be Chinese firms exporting through these countries. Coming soon after the government first exempted ALMM requirements for module use in domestic projects till the next financial year, followed by specific permission to PSU firms to use imported modules, the rising imports are widely expected to hurt domestic manufacturers yet again.

Many Chinese majors have large manufacturing arms in South East Asia, set up originally to avoid US sanctions on solar imports from China. “We have a large manufacturing unit in China. But we have our assembly and other small units in Southeast Asian countries like Malaysia and Vietnam (with whom India has FTA agreements). While manufacturing occurs in China, we often use these FTA countries for assembly. This allows the customers in India to choose at what prices they want to buy these modules,” a Chinese-solar company having presence in Southeast countries in Malaysia, Vietnam and India told Saur Energy, requesting anonymity.

While the larger domestic manufacturers have exports to fall back on in case of weak domestic demand, the government faces a Hobson’s choice of trying to put a stop to the rising imports from these FTA markets. With module prices at an all-time low after two years, the hope is that these imports will help plug the gap with the domestic availability of high-quality modules and enable many stuck projects to move ahead.

Chances are high that sometime next year when domestic manufacturing capacity is expected to touch close to 50 GW with some enhanced backward integration into cell manufacturing too, we might see some steps taken to stop these imports. Definite action can certainly be expected as soon as the country achieves stronger backward integration, besides any barriers going up in key export markets like the US and Europe.