Bridge India

US safeguard duty to have nuanced implications for India

On 22nd January this year, the US government imposed 30% safeguard duty on imported solar cells and modules. The duty has been imposed for four years but will reduce by 5% every year. First 2.5 GW of imports every year shall be exempted from duties.

As per WTO laws, imports from specified developing countries shall also be exempt from duties up to 3% of ‘total imports’ for individual countries and up to 9% of ‘total imports’ cumulatively for all such developing countries. This provision is a silver lining for Indian manufacturers as India is one of the exempted countries. Assuming that the US imports 10 GW cells and/or modules every year, Indian manufacturers can export up to 300 MW of modules per year with a healthy pricing advantage. This is an attractive opportunity but the small scale is not credible enough to support manufacturing in India.

One big unknown is the impact of this decision on US module demand and ultimately, the international prices. The level of duty imposed is less than the US International Trade Commission (US ITC) recommendation and final solar system prices are expected to go up by only between 6-10%. That makes us believe that final impact on US demand and module prices elsewhere would be minimal.

The US decision could still have one important implication for India. India is in the midst of its own trade investigations to consider safeguard and/or anti-dumping duty on cells and modules. We feel that the Indian government has a much tougher call as the downstream market is extremely price sensitive and any price shock would detract from the vastly ambitious target of 100 GW by 2022. Nonetheless, the US decision would ring loudly in the ears of Indian policy makers, who may take a cue from the US in imposing duties of about 20-30%.

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