The recent introduction of provisional safeguard duty on solar modules in India has caused quite a tumult. The implementation was done to save the domestic industry. But, All India Solar Industries Association (AISIA) has taken a strong take against the imposition of any such provisional taxes. The claim is that this will hurt the manufacturers who operate from special economic zones (SEZs)
These special economic zones are considered equivalent to foreign manufacturers and that’s why imposition of safeguard duty will hurt the domestic industry as whole. In contrast to this, the provisional duty was only imposed after the domestic industries approached the Directorate General of Safeguards. The complaint was filed by the Indian Solar Manufacturer’s Association (ISMA) on behalf of five domestic manufacturers –Mundra Solar PV, Indosolar, Jupiter Solar Power, Websol Energy Systems and Helios Photo Voltaic. They complained that their market share has not changed even when there has been a spur in the demand for solar panels all over India.
The World Trade Organization framework allows a country to impose Safeguard duty for a short period of time. This should be done only when the quantity of imports exceeds the domestic production, which may harm the domestic industry.
The import of solar panels from China, Malaysia, Singapore, and Taiwan has gone from normal 1,275 megawatts in 2014-15 to 9,331 megawatts in last fiscal year. If we look at domestic industry, then it produced only 246 megawatts in fiscal year 2015 and it is expected that it will reach 1,164 megawatts in current fiscal year. Domestic manufacturers have also witnessed fall in market share from 13% to an estimated 7%.
The above reasons were presented by ISMA for imposing Safeguard Duty. AISIA countered this by informing that the 60% of country’s present installed solar capacity are installed in SEZs. Additionally, SEZs hold around 45% of 8,300 megawatts of solar module manufacturers. Imposition of safeguard duty will also hurt the indigenous manufacturers situated in special economic zones. It will make them uncompetitive.
Furthermore, the association stated that the primary hindrance to the domestic solar industry is caused by the anti-dumping policy on import of Chinese solar modules. Fiscal year 2017 witnessed a demand of around 6,000 megawatts and it is expected to rise to 10,000 megawatts in FY18.
This is some type of protectionism that US has been accusing India of from 2013, Washington had complained to WTO that India has been discriminating US imports, it has also fallen to 90% since 2011.
There was another incident in 2016 when WTO found that India has been violating trade rules by mandating solar power developers to use only Indian-made cells and modules. WTO also condemned the subsidy provided for domestic solar manufacturers. US triggered another round of litigation at WTO. It argued that India had failed to follow the rules set by WTO.
Whatever the case be, these types of allegations are harmful for solar power sector. They will only cause problems to India in reaching its goal of installing 15,000 megawatts for 2017-18 fiscal year.