The Indian solar industry faces potential disruption due to the imposition of anti-dumping duties on solar glass imports from China. While designed to protect domestic manufacturers, the duties have raised concerns about further module price increases in an industry already grappling with higher costs since April following the reimposition of ALMM.

Solar glass is a critical component, accounting for 8% of total module costs. Currently, each module contains about 20 kg of solar glass. Anti-dumping duties have doubled the effective price of imported solar glass, creating confusion and financial strain within the industry.

The Ministry of Finance recently imposed a provisional anti-dumping duty aiming to prevent the import of textured, tempered, coated, and uncoated solar glass imports from China below a floor price of $677 (~₹57,000)/metric ton.

Before duties, Chinese solar glass cost was in the range of ₹28,000 (~$330)/metric ton – ₹30,000 (~$353)/metric ton. Adding a 10% Basic Customs Duty (BCD), the adjusted import price was ₹33,000 (~$389)/metric ton.

Now with the imposition of anti-dumping, the difference between the current floor price (~₹57,000) and the earlier adjusted import price is  ₹24,000 (~$282)/metric ton, equivalent to ₹24 (~$0.28)/kg.

Ajay Yadav, President of the Renewable Energy Association of Rajasthan, explained, “At ₹24 (~$0.28)/kg, the imposition of anti-dumping duty has added approximately ₹450 (~$5.30)/module of 540 Wp -550 Wp, translating to an increase of ₹0.80 (~$0.0094)/Wp – ₹0.90 (~$0.011)/Wp.”

However, following the announcement of anti-dumping duties, some domestic manufacturers have raised prices by ₹2 (~$0.024)/Wp – ₹2.5 (~$0.029)/Wp — sparking accusations of opportunistic profiteering.

Manufacturers justify the price rise by citing the cascading effects of anti-dumping duties, logistical challenges, and the need to maintain margins. However, developers argue that the price increases are disproportionate to actual cost impacts, as noted by a developer interviewed by Mercom. “Rising input costs should affect only new orders, not those already completed or in progress.”

The price increases have annoyed developers. “We trusted that an assured 40% advance would lock in our rate. But now, rates are increased by ₹1 (~$0.012)/Wp. The bank won’t finance the extra amount. The supplier has delivered only 20% of the goods against the advance. Around ₹10 million (~$117,888) has been deposited, and we’re not receiving goods for that amount,” said Ranjeet Singh, Sales Director at Make India Live, a renewable energy firm.

While some companies are honoring earlier commitments, many are using the opportunity, even for pre-March 31,2024 orders with no DCR (domestic content requirement) mandate. “Programs like PM KUSUM encourage adoption, but sudden duties make us regret our decisions,” the developers said.

Margin Erosion

This pricing volatility adds to financial burdens for developers operating within tight budgets. Absorbing these costs erodes margins while passing them on reduces the competitiveness of solar projects.

Inflated module costs have consequences across the value chain. Higher module costs raise project expenses, increasing the levelized cost of electricity. Component suppliers and EPC (engineering, procurement, and construction) contractors also face reduced business activity.

According to a manufacturer Mercom spoke to, there could be a ₹0.50 (~$0.0059)/Wp – ₹1.15 (~$0.014)/Wp increase in module prices. “As per my estimates, the solar glass that is available for around ₹30,000 (~$353)/metric ton will reach up to ₹60,000 (~$707)/metric ton. Unless categorically mentioned and priced in the contract, the module prices cannot be changed retrospectively. However, when modules are competitively priced, the contracts have room for price adjustment resulting from regulatory changes.”

However, the manufacturers noted that the pricing structure may not have an immediate impact. “The impact could only be seen in new and unbooked capacity in the case of small-scale projects. Currently, we are in a wait-and-watch scenario.”

Price volatility often leads to project delays as developers reassess budgets and renegotiate contracts. Delays put pressure on India’s ambitious target of achieving 500 GW of non-fossil fuel capacity by 2030. Moreover, investor confidence may waver, slowing the influx of capital into the sector.

Developers have also raised concerns about invoking the “change in law” clause if the cost escalation becomes substantial, as with the Basic Customs Duty hikes. This legal provision allows developers to renegotiate terms or claim compensation for unforeseen cost increases arising from policy changes, ensuring some level of financial protection for ongoing projects. This could further delay project timelines, as seen in previous cases involving “change in law.”

Anti-dumping duties aim to support domestic manufacturing in line with the government’s “Make in India” initiative. However, protectionist measures must balance domestic manufacturing and the cost competitiveness of solar projects. Transparent pricing strategies and robust policy frameworks are essential to mitigate unintended consequences of duties.

Yadav emphasized the need for clear and consistent pricing mechanisms, noting, “Manufacturers should share detailed cost breakdowns linked to duty impacts to foster trust with developers.”

While stakeholders await clarity on long-term implications, there is a need for transparent pricing, investment in domestic glass manufacturing capacity, and robust policy support for the industry to grow.