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

The recommendation comes in the heels of a petition filed by the Indian Solar Manufacturers Association (ISMA). A public hearing will be held before making a making a final determination in the matter.

The petition was initially filed on December 5, 2017 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.

The preliminary finding is based on the data submitted by the domestic manufacturers and would be subject to further scrutiny.

The Directorate General of Safeguards noted that even though the petitioners had requested the imposition of safeguard duty on China, Taiwan, Malaysia and Singapore, other than China and Malaysia, the solar cell imports did not exceed 3% individually and 9% collectively. Hence, the DGAD’s provisional safeguard recommendation is restricted to only Chinese and Malaysian cell manufacturers.

In the report, the Directorate General mentioned that the petitioners include Special Economic Zones (SEZ) units who qualify to be treated as a domestic industry. But according to the SEZ Act 2005, Section 30, any goods movement from an SEZ unit into the domestic tariff area is open to duties of customs including a safeguard duty, where applicable. So any product sold by an SEZ unit into the domestic market will attract the same safeguard duty as the imports from China and Malaysia. To put it simply, the petitioners who operate in SEZs would not only lose the protection of the safeguard measure, but they would themselves be subject to the safeguard duty. In which case there would be zero benefit for petitioners from SEZ, while the entire industry would be upended.

Speaking to Mercom, an official at the office of Directorate General said, “Even if these petitioners are in SEZ, they are producing in India and then exporting it elsewhere. They function in the country and follow the laws just like any other domestic manufacturer. The only difference is that they have some relaxations as they are in SEZ, but that doesn’t mean their petition won’t be considered. They are a part of the domestic manufacturing diaspora.”

A large domestic manufacturer told Mercom: “I do not understand this petition. First, there are regulations that the manufacturing units in SEZs won’t be counted as part of the domestic manufacturing capacity. Now, the petitioners are in SEZs. If a safeguard duty is imposed, they will also have to pay. Or the laws and regulations governing SEZs need to be changed to accommodate these companies not paying the duty. This petition is like these people are putting their own feet on the axe.”

We were not able to get a response by any petitioners when we contacted for comments.

As we have reported before, most manufacturers do not want anti-dumping imposed on foreign made cells as the domestic cell manufacturing capacity is not enough to replace imports. This petition adds to the uncertainty in the sector where project development risk is increasing with new challenges popping up every day.

ISMA has already filed an anti-dumping petition in June with the Ministry of Trade and Commerce, against solar modules and cells from China, Taiwan and Malaysia.