The government has recently introduced a safeguard duty on imported solar cells from China and Malaysia, commencing from July 30, 2018. This step is mainly focused on providing a protective shield to the domestic solar cell industry which has been grappling with the implications of increased import of cheaper solar cells. The safeguard duty will be applicable for a period of two years, with provisions for gradual reduction in duty charges.
The Dynamics of Safeguard Duty
The safeguard duty on these imports has initially been set at 25% for the first year. This rate will decrease to 20% for the first six months of the second year, and further drop to 15% for the final six months. These rate reductions with the passage of time are aimed at ensuring a balanced approach towards the protection of the domestic industry and need for foreign trade.
Reasons behind the Imposition of Safeguard Duty
A major chunk of solar cell imports in India originate from China and Malaysia. These countries together account for over 90% of total inbound shipments in India. This high import dependency prompted the Directorate General of Trade Remedies (DGTR) to investigate the impact on the domestic industry. It was found that the spike in imports had caused “serious injury” to the local manufacturers. For instance, cell imports ballooned to 9,790 MW in the financial year 2017-18, a massive leap from 1,275 MW in 2014-15. Such alarming figures essentially laid the groundwork for the introduction of safeguard duty.
Impact on the Domestic Solar Industry
What remains clear is that this move is primarily aimed at fostering the domestic solar cell manufacturing industry. However, it is pertinent to note that the policy could potentially backfire for existing projects which are heavily reliant on cheap imports. Imported solar modules are approximately 8-10% cheaper than those manufactured in India. Further, solar modules constitute nearly 60% of the total project costs. That said, almost 88% of module requirements are fulfilled through imports.
| Year | Solar Cell Imports (in MW) |
|---|---|
| 2014-15 | 1,275 |
| 2017-18 | 9,790 |
The Role of DGTR
The DGTR, which operates under the Ministry of Commerce, is tasked with probing into the presence of grave injury or looming threat to domestic industry due to increased imports. In this context, the DGTR played a crucial role in backing the imposition of safeguard duty on imported solar cells after thorough investigation and validation of claims made by local manufacturers.
