Sometime before 21st May 2014, the Directorate General of Anti-dumping Duties (DGAD) under the Ministry of Commerce is expected to give its recommendations on the PV cells and module dumping investigations that started on 21st May 2012, based on a complaint by four Indian cell manufacturers. There have been contradictory reports as to which way the results of the investigation may lean (refer link 1, link 2 and link 3). The Ministry of New and Renewable Energy (MNRE) has been opposing imposition of any anti-dumping duties (refer) to avoid adverse consequences for solar project capacity addition in India.
- Antidumping is a counterproductive measure that can severely disrupt the Indian solar market
- If it is introduced, it will increase the cost of solar in India, moving it away again from grid parity
- Indian manufacturing would be better served by a stable and growing Indian market and government support in creating an innovation ecosystem
‘The Political Economy of Antidumping’, a paper prepared on the 100th anniversary of anti-dumping duties concludes “a simple summary of research on dumping and antidumping would be that: dumping appears not to be much of a problem; but antidumping is much worse. The antidumping mechanism is really about neither fairness nor predation. It is, instead, about protection, and because it wraps itself in the mantle of fairness and because it is obscure and because its details permit greater protection to be delivered than would be the case with simple legislated protection, antidumping protection is particularly a bad protection.” As explained in this blog, this seems to be particularly true for the Indian solar market.
It may not be very difficult to prove dumping of solar modules in India in 2011-12 when the global PV market was suffering from over capacity and falling prices. To that effect, dumping by Chinese suppliers was proved in the US and Europe as well. During those tough times in the market, domestic manufacturers (most of whom set up shops with the purpose of exporting to Europe) sought refuge in domestic demand and demanded protection. This is when the anti-dumping process started. Since then, many players across the world, including in China, the US and Europe, have shut down driven by fierce competition and falling prices. But as demand has now soared and module suppliers are returning to profitability, the Indian anti-dumping duty process is still ongoing and causing tremendous uncertainty in the market.
The question for India is, whether anti-dumping duty today is a good idea and, given that the context has changed significantly, if political sense can override procedural logic. Indian manufacturers have asked for anti-dumping duties to be imposed against imports from four prominent module supplying countries. The only prominent manufacturing geographies left out are Europe and Japan, which – like Indian suppliers – are relatively more expensive. Thus, the target of the anti-dumping petition, is the entire competitive segment of the industry rather than any specific companies or country.
If the duty is introduced, it will significantly increase the cost of solar modules and set back most of the gains made toward cost-parity in the past two years. It will also make most of the large scale projects, currently developed on wafer thin margins, unviable. As these developers start backing out, it will lead to long drawn legal battles and shattering of confidence in the Indian market. State and central solar programs will either be scaled down or scrapped in such a scenario.
Proponents of anti-dumping duty argue that, in the long-term, it will help an indigenous domestic manufacturing industry develop, improving India’s energy security and balance of payments situation. However, given the uncertainty related to longevity of such measures, we doubt if any meaningful investments will actually flow in creating globally competitive manufacturing facilities in the country. (If that were possible, protection will not be needed to begin with.)
BRIDGE TO INDIA believes that the over aching goal of government should be to allow solar to develop into a robust, large market – as independent as possible from the vagaries of policies. India would benefit greatly from having a cheap, secure energy supply option. Indians would benefit from more power and jobs (most of which are in installation and services around plants, and not in manufacturing). If solar manufacturing is to be encouraged as a political goal, there are much better ways to do so, for instance through more competitive finance and innovation support. The most harmful effect of the anti-dumping duty process is the insecurity it brings to a market that instead needs nurturing. India needs more solar energy.