The growth of India’s solar sector is being hampered by the proposed safeguard duty. Earlier this year, more than 2 GW of planned solar tenders were postponed across the three Indian states of Bihar, Maharashtra, and Karnataka due to the concerns regarding duties on solar components.

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

Since then, several court cases have been filed by the affected parties. In April 2018, the Madras High Court has dismissed the writ petition filed by domestic project developer Shapoorji & Pallonji against the levy of the 70 percent safeguard duty.

But in another ruling in May 2018, the Delhi High Court disposed a petition filed by ACME Solar against the levy of the duty.

These contradictory rulings warranted an urgent intervention from the policy makers to bring clarity to the subject. Consequently, the Directorate General of Trade Remedies (DGTR), a newly formed body under the Department of Commerce, invited interested parties for a public hearing on June 26, 2018.

Below are some of the highlights of the deliberations that took place during the hearing, which was presided over by additional secretary of Ministry of Commerce and Industry, Sunil Kumar, and attended by around 250 representatives.

The international solar module manufacturers argued that Mundra Solar, which is involved in the manufacturing of export oriented solar modules, and one of the member of Indian Solar Manufacturers Association (ISMA) that filed a petition with the Directorate General (DG) of Safeguards for the imposition of safeguard duty on imported solar cells from China, Malaysia, Singapore and Taiwan, should be treated on par with the international solar manufacturers citing a previous hearing on electric insulators and electric foil (that was upheld by the DG Safeguard) to assert their point. In its defence, Mundra Solar said that since the Special Economic Zone (SEZ) is governed by Indian laws, they should be treated as domestic manufacturers.

To bolster their claim, international manufacturers gave an example of the yellow phosphorous case, where the DG safeguard did not levy any duty as the domestic industry was not equipped to cater to market demand. Similarly, they argued that to achieve the installation target of more than 100 GW, current domestic manufacturing capacity is not sufficient and should be treated accordingly.

Representatives from the Chinese Embassy were present at the hearing. They pointed out that Indian modules manufacturing was always a loss-making enterprise and tried to decouple it with burgeoning Chinese solar modules imported to India. They gave the example of Indosolar and Websol and pointed out that the financial health of these manufacturers has actually improved in the last couple of years.

Indian domestic manufacturers said that the proposed 70 percent safeguard duty was low and if recalculated, the duty should be on the higher side. Indian manufacturers such as Adani Solar, Hindustan Power, Websol, Jupiter Solar, and others argued to increase the duty from the preliminary findings of 70 percent to 95 percent.

They asked for thin-film technology to be added to crystalline silicon (c-Si) in the provisional safeguard duty. There reasoning was based on the fact that both the technologies convert sunlight to electricity, and United States has also classified them as the same.

Domestic manufactures further maintained that the exponential growth of Chinese solar module imports have shrunk the market for them and there is little room for competition. They added that there is an estimated $30 billion outflow for the purchase of modules and cells, which would lead to domestic job losses and is therefore not in the public interest.

It was mentioned that four out of the five top solar module manufacturers have stopped production due to dumping of Chinese modules. An Adani representative said the company is utilizing only 10 percent of their manufacturing capacity. Domestic manufacturers reasoned that solar installations account for only 6 percent of the total costs to DISCOMs and the proposed 70 percent duty will not even impact the power cost by ₹0.01 (one paise)/kWh.

Mercom reported in March that manufacturers have announced capacity expansion plans of 4 GW for 2018. If most manufacturers have shut down production and have very low capacity utilization, it is hard to understand how they would be simultaneously investing in increasing manufacturing capacity.

Developers like ReNew Power, Shapoorji Pallonji and ACME alleged that the proposed 70 percent safeguard duty would increase the price of power by ₹5 (~$0.073) per unit. Solar power would definitely cost more if a duty is imposed, but it is unclear how it would go up by as much as ₹5 (~$0.073)/kWh.

Both manufacturers and developers presented extreme scenarios in trying to prove their respective case according to participants at the hearing.

Representatives from Taiwan, Malaysia, Singapore, the United States, and Europe were also present at the hearing. Malaysia and U.S. representatives did not speak at the meeting.

All stakeholders have been given time to make written submissions by June 27, 2018. The rejoinders will have to be submitted by July 2, 2018. This will be the final deadline without any further extensions. A ruling on the matter is likely to come by the end of July.