The Directorate General of Trade Remedies (DGTR) has recommended a 25 percent safeguard duty on solar cell imports from China and Malaysia for the first year, followed by a phased down approach for a second year.

In the first six months of the second year, a safeguard duty of 20 percent will be payable by exporters to India and in the latter half of the second year, exporters will pay a safeguard duty of 15 percent.

DGTR has recommended no duty will be levied on companies from other developing countries.

The DGTR made these recommendations after examination and analysis of submissions by interested parties.

Commenting on the development, a source at one of the petitioners  told Mercom, “This will now go to the board of secretaries consisting of officials from MNRE, Ministry of Power, Ministry of Commerce, Department of Industrial Policy & Promotion, Revenue, Labor and Agriculture. These secretaries will then evaluate the recommendation and decide whether it is to be imposed, not imposed or imposed up to a certain percentage lower or higher than 25 percent. Their evaluation will then go to the Ministry of Finance which will then issue a gazette for the implementation on the recommendation of the board of secretaries”.

Key Findings of Investigation

• There has been a significant increase in imports of the product under consideration (PUC) in absolute terms as well as in relation to total Indian domestic production over the entire period of investigation (POI).
• The domestic industry has suffered serious injury, considering overall performance, on the basis of listed economic parameters such as market share and profitability, which have sharply declined over the injury period 2014-2015 to 2017-2018 (annualized) whereas market share of imports has increased during the same period. This has caused significant overall impairment to the domestic industry. The rise in imports and coinciding serious injury caused to the domestic industry during the injury period, establishes causality.
• The domestic industry has been able to demonstrate that the developments in the market on surge in imports of the PUC were unforeseen in the context of Article XIX of General Agreement on Tariffs and Trade (GATT).
• There will be some impact on the solar power developers and also on consumers as a result of safeguard duty on the PUC.
• The imposition of safeguard duty in this case would be in public interest because it will prevent complete erosion of manufacturing base of solar industry in the country which is upcoming and holds promise for a stronger manufacturing base in the country in future, at the same time, it is also in the public interest, to prevent undue escalation of solar power cost, tariff to the final customer and that attainment of the target of 100 GW of solar power deployment by 2022 is not derailed. The consideration of two competing interests require a balanced view.
• From the analysis of post POI data, it has been observed that the position of domestic industry further deteriorated on account of continued low price of import of PUC which continued price injury to the domestic industry, thereby establishing the threat of injury as well.

The DGTR also recommended that as imports from other developing nations will not be subject to the safeguard duty as individually and collectively they do not account for more than three percent of solar modules or nine percent of solar cell imports to India.

Case Background

In a preliminary finding, the Directorate General of Safeguards Customs and Central Excise had recommended a 70 percent safeguard duty on solar cells imported from China and Malaysia for a period of 200 days.

The recommendation was the result of an investigation carried out by DG Safeguards based on the petition filed by the Indian Solar Manufacturers Association (ISMA).

The petition was filed by ISMA on behalf of domestic manufacturers including Mundra Solar PV Limited, Indosolar Limited, Jupiter Solar Power Limited, Websol Energy Systems Limited, and Helios Photo Voltaic Limited.

The companies claimed that they collectively manufacture more than 50 percent of all solar cells manufactured in India. The applicants had requested immediate application of a Safeguard Duty for four years.

At a public hearing held in June 2018, both manufacturers and developers presented extreme scenarios in trying to prove their respective case according to participants at the hearing.

Similarities to U.S. Safeguard Case

The 25 percent safeguard duty recommended by DGTR is similar to the safeguard duty levied by the United States. In January 2018, the United States had set anti-dumping tariffs on imported solar cells and modules into the country at 30 percent for the first year. The tariffs are to gradually decline in five percent increments over a four-year period to 15 percent by 2022. The U.S. had made few developing nations exempt, including India, from the levy of safeguard duty.

“The safeguard duty recommendations are in line with what the industry was expecting. There is no question this will increase solar power costs, but the safeguard duty has been toned down from the initial 70 percent to 25 percent for the first year. However, it is now up to the Ministry of Finance to consider whether to accept the recommendation or not. Hopefully the decision is taken quickly to remove uncertainty in the market,” said Raj Prabhu, CEO of Mercom Capital Group. It is in the best interest of manufacturers that there is robust demand, which would not be the case if a high duty is imposed.”

“It should be noted that if the Safeguard Duty is imposed without exempting SEZ to DTA removal, it will affect the domestic manufacturing industry adversly as 3,825 MW out of 8,898 MW of installed capacity of solar modules is based in SEZ and 2,000 MW out of 3,164 MW of installed capacity for solar cells is based in SEZ.

If the government wants to impose SGD, it should exempt SEZ to DTA clearance of Solar Cells and modules from the ambit of SGD, otherwise it will lead to counterproductive results and destroy the domestic manufacturing industry, which is already in bad shape.

Otherwise, the government should come out with a specific exemption by restricting safeguard duty imposition to input costs (which is subject to duties of safeguard) for all SEZ to DTA clearance to accord equal protection to units in SEZ and DTA. Imposition of safeguard duties in the current manner will make SEZ units uncompetitive and will force them to shut their operations,” said Gyanesh Chaudhary MD and CEO of Vikram Solar.

Update – Updated article with a quote from Vikram Solar