With Safeguard Duty Expiry A Day Away, Solar Bodies in a Huddle For Way Forward

With the Safeguard Duty (SGD) on solar modules expiring tomorrow, there is predictable anxiety among Indian module manufacturers on the future after the duty expires.

Currently, there is an ongoing investigation by the Directorate General of Trade Remedies against alleged Chinese dumping of modules, which has got delayed due to a court intervention. Thus, a quick wrap up of the DGTR enquiry in their favour seems to be the most likely outcome for further protection till April next year, when the really high duties and tariffs take effect. A 40 percent basic customs duty on modules, and 25 percent on cells has been confirmed by the MNRE on imports from April 1, 2022.

The Safeguard Duty expiry, which was a fact known for two years, was possibly sought to be managed by the current DGTR investigation and the hope that it would end with a punitive tariffs again, to compensate for the absense of SGD. The delay here seems to have queered the picture.

For AISIA (All India Solar Industries association), ISMA (Indian Solar Manufacturers Association) and NIMMA (North India Module Manufacturer Association), three of the larger organised solar manufacturers bodies in the country, this is a crisis big enough to demand a meeting with the MNRE secretary, which they got yesterday, and a follow on with the power minister, MR R.K. Singh this week.

They are up against developer firms that have made a case for a duty free period between now and April, to enable them to recoup losses caused by covid delays as well as the unexpected increase in module prices from China as well as India that follow, in the past few months. These developers have contended that with prices having gone up by 10-15%, projects set for completion between now and the end of 2022 face a tough situation with costs being higher than those projected at the time of bidding.

Domestic manufacturers are dead against this, as they see any extended opportunity as an excuse to order for upto two years, which would ‘kill’ both existing and upcoming capacities according to them. the one thing they are certain of is that come what may, cost of Chinese imports would be much lower than Indian manufactured modules. Leading to the risk to thousands of jobs in the sector.

As a remedy, they have proposed extending the Approved List of Models and Manufacturers (ALMM) to more tendered  projects, advancing the BCD date or extending the safeguard duty of course. Of course, any move will have to keep in mind the risk of litigation due to the long list of delayed projects that might cite a change in law event, or even discoms that might demand lower tariffs on the other side.

However, we understand that any extension of the SGD can only happen at a lower rate, although that rate could be just a shade under existing rate too. Possibly the best way out for now.

What might work in the manufacturers favour is that key developers like  the  Adani Group, Renew Power, Azure Power are already into manufacturing themselves, or planning to soon. Thus developer resistance is likely to be lower than usual to protective moves by the government.

Interestingly, the Power minister has gone on record to say that the government will use both tariff and non tariff barriers  (BIS certification, ALMM list) to ensure domestic manufacturing dominates, especially for all projects awarded post April this year. The expiry of the SGD tomorrow is the first real test of that assertion.