Safeguard Duty: Manufacturers Back Govt Move; Raise Concerns on Clarity

If SEZ units are not exempted from SGD, it will lead to further job losses and harm the manufacturing ecosystem in India, which is already bleeding: Gyanesh Chaudhary

Despite solar manufacturers’ welcomed the government’s move on safeguard duty imposition on solar imports from China and Malaysia, they have raised their concerns as well and want more clarification from the government.

After DGTR recommendation, Indian Government has imposed long awaited safeguard duty on imports of solar equipments from China and Malaysia for two years.

The safeguard duty implemented on phased manner i.e. 25 percent on the imports from July 30, 2018 to July 29, 2019 and a gradually reduced rate of 20 percent from July 30, 2019 to January 29, 2020 and 15 percent from January 30, 2020 to July 29, 2020.

A spokesperson from Saatvik Green Energy when contacted has welcomed the move and said, “It will be interesting to see how various stakeholders react to it. Now the onus is on indigenous manufacturers to prove their capabilities, and take Indian solar industry forward.”

On the other hand, Waaree Energies, Director, Sunil Rathi said, “The announcement on the Safeguard Duty imposition comes as a welcome respite. The recent developments kept the manufacturing players on the fence, but we are glad to receive the much-awaited clarity. The move will pave the way for Indian manufacturers to showcase their capabilities.”

“However, since imposed duty applies only to developed countries, China and Malaysia, the authorities need to be vigilant towards imports from other developing countries. If we fail to monitor such movements, history will repeat itself, with India becoming a dumping nation for solar equipment, only from a different source. Moreover, with the growth in demand and economies of scale, it is imperative to protect the interest of domestic manufactures. Having said that, as the largest solar manufacturer in the country, we are happy to be an active partner and contribute towards the solar growth in India,” he added.

While a manufacturer from SEZ – Vikram Solar, MD and CEO, Gyanesh Chaudhary commented, “The Safeguard Duty Notification issued by The Ministry of Finance does not provide exemption to the projects which have already been auctioned out (approximately 20-25 GW). This will completely derail the solar industry. To add on to that, the notification does not provide any relief to Solar cells and modules manufactured in SEZ and cleared to DTA. Currently, 40% of Solar Module Manufacturing Units and 60% of Solar Cells Manufacturing Units are located in SEZs.

In light of the SEZ issue, the notification defeats the very purpose of Safeguard Duty, which is to protect and promote domestic industry. While it may seem logical that SEZs should be exempted, considering that the whole purpose of applying Safeguard duty is to protect domestic industry against imports so why should they pay these duties, unfortunately the policy makers seem to be in dilemma.

A recent report by Parliamentary Standing Committee indicated that in recent years solar imports have led to massive job losses. If SEZ units are not exempted from SGD, it will lead to further job losses and harm the manufacturing ecosystem in India, which is already bleeding. Special Economic Zones (SEZs) enjoy certain benefits, primarily to promote exports but also to cater to the Domestic Tariff Area (DTA).  If the safeguard duty is applied without exemption as per the notification, the domestic manufacturers in the SEZ will also be liable to pay Safeguard Duty whenever they sell modules in India. This is because SEZs are considered to be outside the Indian Customs Territory and this would, therefore, be counterproductive for the domestic industry. This move will, in fact jeopardise Honorable Prime Minister’s Solar Mission targets.

We strongly recommend that:

1. Government should exempt SEZ to DTA clearance of solar cells and modules
2. Government should exempt Projects which have already been auctioned out from the ambit of duties of Safeguard.

It should also be noted that it has been a year since GST was implemented and developers and EPC contractors are still not able to pass on the additional cost of GST to end consumer due to regulatory and administrative bottlenecks. Therefore, it will be very difficult to pass on the cost to end consumer under change in law clause.”