Anti-dumping duties on solar PV cells and modules will bring the Indian solar market to a halt

Anti-dumping duties threaten to torpedo the Indian solar market at a time when the new government has made clear its intention to grow solar. They are an ill-conceived and ill-timed vestige of the previous government and serve a very small section of the Indian solar industry at the detriment of the majority of the rest, the power consumers and the taxpayers.

  • Solar will become more expensive (by at least 70 paisa per kWh) and up to 1 GW of existing projects could be scrapped. This will set the solar market back by 2 years
  • A small group of Indian industry players will win in the short term. The majority of Indian industry players (including manufacturers) will lose. In the long term, all lose
  • India should focus on making solar cheaper, not more expensive. Supporting domestic manufacturing is possible under this premise, e.g. by extending cheap loans

The Ministry of Commerce in India has proposed anti-dumping duties of between $0.11-0.81 on cells/modules imported from China, US, Malaysia and Taiwan (currently about 80% of modules used in Indian projects). The decision is based on a very narrow data set from two years ago and now threatens to affect the entire industry for years to come. In addition, the proposed duties would be very detrimental to India’s larger energy, investment, development and growth story.

The duties will result in an increase in the cost of solar power in India of at least 10% or 70 paisa per kWh. Just for the planned new government-incentivized projects of 7.5 GW by 2017, this would cost the Indian power consumer or taxpayer around INR 3,581 cr ($0.6 bn).

But more likely, anti-dumping duties would hit investor confidence badly and bring the market to a halt, setting it back by at least two years. Up to 1 GW of solar projects could be scrapped. Project developers will be forced to reconsider their plans and commitment to the Indian market.

International investors and banks, just gaining cautious new confidence in the Indian market, will be put off as a result. The duties will even harm the majority of domestic module manufacturers, who are almost entirely dependent on cell imports (mainly from China). They will find it very difficult to sell in the India. At the same time, they (like Indian cell manufacturers) may also be exposed to retaliatory measures in export markets.

The negative sentiment will affect the entire solar eco-system in India including EPC contractors, installers and thousands of solar entrepreneurs selling solar products and services across the country. In addition to harming the solar industry, the anti-dumping duties will have a broader negative effect in the country. More expensive solar can contribute less to ameliorating India’s power deficit and energy import woes. Millions of un-electrified households will not get access to a solar solution.

The duties will arguably give a short-term boost to the 3-5 Indian solar cell manufacturers whose sales in India will increase. However, in the long term, they will also be hit by a decline in demand for solar.

We doubt that a one-off measure such as anti-dumping duties would entice investors to set up more manufacturing capacity in India. What would really drive investment into manufacturing in India is the creation of a vibrant, large solar market and long-term measures to boost competitiveness of Indian manufacturing: for example, a consistent and transparent policy framework, investment in R&D and engineering skills development, or the creation of special investment zones with fast track project clearances. India needs to focus on making solar cheaper, not more expensive.

At this point, the anti-dumping duties can only be stopped by a strong political intervention in this narrow, quasi-legal process, in the name of the larger public good.

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Tobias Engelmeier is the Director and Founder at BRIDGE TO INDIA.

13 comments

  • The analysis above is flawed. In reality, no lose will occur to Govt. as increased subsidy on account of tariff will be compensated by the anti dumping duty that Govt. will gain. The rampant dumping by manufacturer from these countries is a known fact and can no longer be ignored. The fact that they have been dumping modules to markets like India is evident from a cursory look at their P&L and Balance Sheet over the last couple of years.

    Whilst in immediate short term (~3 months), this may cause panic and knee jerk reaction in the market,in medium and long term (~ 6 month+), the solar market development shall return to its original growth level as has happened in several European countries as well as USA.

    In reality, Solar power development continues to be heavily subsidized in India (No import duty, no excise duty, liberal FiT regime etc…), the benefit of such subsidy till now was resulting in investment opportunities and employment generation elsewhere (China, Malaysia to quote a few countries), the proposed anti dumping duty will thus for the first time create level playing field and is expected to result in large scale investment and employment generation in solar equipment sector (Modules, inverters etc…)

    Such investment will go a long way in ensuring that Indian manufactured modules have an equal chance to achieve economies of scale, cost competitiveness and the reliability as is currently enjoyed by Tier -1 manufacturers across the globe.

    Thus it can be concluded that the proposed anti dumping duty is indeed a welcome step and will be a win-win solution for both manufacturer and solar power developer in medium term.

    • Its correct interpretation and truth. Bridge to India has been against AD and I am surprised how they have published your comments in support of AD. In past I have posted several such comments but never published by Bridge to India. When we import cell and modules they are duty free and when we import module components we pay duty. This way modules made in India will be expensive. There has to be a level playing field in any case. For short term gain we can not sacrifice long term benefits.

    • Dear Hardik,
      thank you for your comment. We don’t think the net effect for the government is zero. That would be the case, if the modules continue to be imported from Malaysia, China, Taiwan and the US. In that case, developers would pay the government a certain amount in duties and then the get the same amount back in higher tariffs. That analysis is wrong.
      1. If that were the case, then why impose the duties in the first place? Market shares will remain the same. we are just adding a layer of complication and transfer or funds.
      2. What will, however, happen, is that modules from Japan, Singapore, and Korea will suddenly be made very competitive. Compare this to how Indian modules suddenly became competitive in Europe after a duty on Chinese modules was imposed. Indian manufacturers will not be able to sell much more in India (with the exception of Tata), because they are either too expensive for the quality they offer or import cells from China/Taiwan themselves, which cannot be sold in India without incurring the antidumping duty. Thus the developers do not end up paying the duty. Indian manufacturers do not benefit and the Indian tax payer has to pay the difference between cheaper cells/modules from China etc. and more expensive ones from Japan etc.. This is the extra 70 paisa we assume in our analysis.
      I want to clarify that we are not against manufacturing in India. But we believe that it needs to be (a) embedded in a long term strategy (how to get them on their feet without protection?) and (b) done in such a way as to not pull the entire market down to everyones damage.

  • Modules have a 25 year warranty. The companies dumping modules are loosing money. The investors and governments that are subsidizing these company’s will stop handing them money, they will go out of business, and countless people who are relying on these warranty’s will be left out in the cold if and when the product fails. When viewing this issue from this perspective, these Anti-dumping duties will protect the Indian consumers.

  • Most of us engaged in this field are disturbed by the latest news of GOI imposing Anti-Dumping Duty on solar cells/modules coming from China, USA, and Malaysia.

    This step, if taken shall be highly retrograde for the whole chain of solar PV industry in India. Please note that the top global companies which were producing 500-MWp to 600MWp of solar cells/modules per year closed down their factories way back in 2010 – because it became unviable if a PV company was not a vertically integrated unit and was producing less than 1-GWp of solar cells/modules per year.

    The domestic PV companies in India even today are producing between 4-MWp to 125-Mwp per year and are continuously seeking GOI subsidy and/or policy intervention for their survival!! Are we trying to help such companies which will never be able to compete on their own and shall close their shop as soon as the government protection and subsidies are withdrawn? Most countries are buying a solar generator without being sentimental about domestic production hoopla, at $0.55 to $0.6/Wp, at 16% efficiency and 100% bankable, with 40-year+ life, having its embedded energy paid back in side 1-year from self-generation. Till such times that a mega-size company with 1Gwp to 3GWp vertically integrated PV factory becomes a reality , we should go by the global prudence of generating free energy all over India using latest state-of-the-art solar cells/modules – this import of solar cells/modules will save India huge amount of foreign exchange from the avoided import of fossil fuel. .

    Supporting such companies is not good for the country. We must focus on India-centric solutions for distributed solar power systems which are accountable in delivered energy.

  • The only thing in favour of imposing AD duties is that it would *force* foreign companies to set up manufacturing facilities in India. However, there are better ways of doing that for sure. Besides, imposing AD duties will elicit retaliatory duties from other countries.

    However, all indications are that AD duties will not be imposed. Let us see what Mr. Modi does…

    – Prashant.

  • How is it to explain, that the Indian PV market is driving itself against the wall. Full speed and with open eyes.
    A selling price of 5.51 Rs per unit is only theoretically possible. On a white paper. Certainly not in real life.

    If India follows this way, it will destroy all their attempts to feed the energy demand of a growing economy. Not even 5 years it will take and the blind eyes of the solar community will receive the light of the truth.

    There is no theoretically chance to avoid a total collaps of the Indian PV market.

    Why? Only 2 reasons for the start:

    1. 12% to 16% interest rate

    2. the technical imperfection of ALL the PV systems that have been installed in the last 2-3 years. None of them – and this is serious spoken – non of them have a lifespan of 25 years, not 20 years, not 15 years. Probably not even 10 years.

    This is not negativ thinking.

    This is matter of physical and chemical realities. Which nobody wants to hear.
    But light will come……

    Maybe the anti dumping duties will solve the problem anyway.

    Christian Kuen,
    CEO Sonnenstrahl

  • […] The Minister for Commerce and Industry Nirmala Sitharaman clarified in the upper house of India’s Parliament that an ADD between USD 0.11 to 0.81 is likely to be imposed on modules imported from China, Taipei, Malaysia and USA (‘subject countries’). The Ministry of Finance is evaluating the proposal (click here). The government indicated that the duties collected might go towards providing subsidy to projects affected by ADD. BRIDGE TO INDIA has maintained that ADD would cause significant damage to the Indian solar market. And any convoluted move to subsidise the affected projects is going to further distort the market and create a bureaucratic nightmare. See our popular infographic here. […]

  • […] Expectations in India too have been high as the new government was sworn in last month (refer). No one disputes the fact that India is going to be a key solar market of the future. The International Energy Agency (IEA) even predicts that in terms of yearly installations, India will overtake the US by 2023 and China by 2029. However, as of today, India is underperforming. Policy uncertainty, regulatory confusion and lack of synergy between state programs and the national mission has led to dampening of enthusiasm. The international interest that had come to India around the time projects were being installed in Gujarat is fading. Several large equipment suppliers and even some Indian and international project developers are trying to diversify their focus away from India. Now, the proposed imposition of anti-dumping duties provides a crucial testing period for the sector (refer). […]

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