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Protectionism will not solve the problems of Indian manufacturers

Protectionism will not solve the problems of Indian manufacturers

Worldwide manufacturing capacity of PV cells has grown over four fold since 2009. Most of this new manufacturing capacity has come up in China. The global module manufacturing industry is heavily driven by large production capacities that have been developed in China. Allegedly, Chinese equipment makers get free power for manufacturing, free land, incentives for exports and cheap capital.

  • This has prompted local industry in many countries to seek protectionist measures against cheap Chinese imports. US manufacturing industry has taken concrete measures to seek anti-dumping duty against Chinese imports
  • These protectionist measures were likely to have a positive impact on the Indian market
  • However, Indian manufacturers also applied for anti-dumping protection against China and other countries. BRIDGE TO INDIA believes this protectionism will not help improve the market for Indian manufacturers

Even though solar installations across the world are growing, the addition in manufacturing capacity has grown faster, creating an oversupply. In a highly competitive and oversupplied market, the Chinese manufacturers, who work on economies of scale and get government support, have been able to cut costs at a pace that manufacturers across the world, including India, have not been able to do. This has prompted manufacturers in various countries to call for protectionist measures. As a short term measure, the US recently imposed anti-dumping duties on Chinese PV cells. (Refer to BRIDGE TO INDIA’s earlier blog titled “US-China solar trade war to have a positive impact on India” to read more on that subject)

Now, Indian manufacturers have called for a similar measure. They have gone a step ahead and asked for anti-dumping duty on module imports from Taiwan, Malaysia and the US as well. The manufacturing capacities of multiple Chinese companies like LDK, Suntech and Trina Solar are as high as 2GW per year as compared to the 215MW manufacturing capacity of Moser Baer, which is the highest in India. In today’s date and time it can be assumed that a capacity below 350MW-500MW is not competitive for mass market sales. Protectionism at this stage will not really help anyone, it will only be a hindrance to reducing the cost of solar power in the country. If they can, Indian manufacturers need to think of scaling up manufacturing capacities to be competitive. Keeping this in mind, the government should also think of providing support through manufacturing incentives to scale up manufacturing capacities rather than adopting protectionist measures.

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