India’s total renewable energy installations stand at around 75 GW, of which wind energy accounts for more than 35 GW, followed by solar energy, which has witnessed exponential growth with its total installation capacity increasing from 3 GW to about 30 GW in the last five years.
India is also a very price sensitive market where the lowest tariff matters more than any other criteria. Most of the renewable growth has been fueled by the import of cheaper components such as solar cells and modules, textured tempered coated and uncoated solar glass, Ethylene Vinyl Acetate (EVA) sheets, and others.
However, the Indian manufactures of these components feel that the import of solar modules and other components are encouraging the unfair trade practice of dumping and suitable duties should be applied to re-establish fair and open competition in the domestic market.
Trade cases in clean energy already have a history in India with the first antidumping case filed at the end of 2012. That anti-dumping investigation in 2012 was launched against imported cells and modules from the U.S., China, Taiwan, and Malaysia. This case was eventually withdrawn in 2014.
What initially started in solar has now spread to other areas of clean energy in the country.
Safeguard duty on solar modules
The safeguard duty will then be reduced to 20 percent on the import for solar modules from July 30, 2019 to January 30, 2020 and will be further reduced to 15 percent from January 30, 2020, to July 29, 2020.
The purpose of the safeguard duty was to spur the growth of the domestic manufacturing industry in the production of solar cells and modules. However, in the short-term, it appears to have hampered the pace of 2018 solar installations by nearly 15 percent year-over-year. Some government officials have suggested that the safeguard duty could be extended, but according to our reporting, it isn’t likely to happen any time soon. Safeguard has helped domestic manufacturers who have captured a larger share of the market since the duty imposition according to Mercom’s India Solar Market Leaderboard 2019.
Anti-dumping duty on import of solar glass from Malaysia
In February 2019, the government of India imposed an anti-dumping duty of $114.58/metric ton for a period of five years on the import of textured tempered coated and uncoated glass from Malaysia.
The investigation by DGTR concluded that the domestic industry suffered a material injury due to the export of solar glass to India from Malaysia at below normal prices.
Indian solar glass producer Gujarat Borosil filed a petition requesting the imposition of anti-dumping duty. The period of investigation covered a 15-month period stretching from October 1, 2016, to December 31, 2017, and the injury investigation covers the data for the previous three years.
According to Ashok Jain, Director at Gujarat Borosil Limited, “The only manufacturer on which the duty has not been levied is XYG Malaysia. The duty is levied on two other merchant exporters who buy and export in small quantities, so virtually there is no duty as of now.”
“The dumping is still going on but there is some improvement in prices. However, it is still 15 percent below our domestic selling price,” he said.
On the question of filing a review petition with the DGTR, he added, “We are seeking advice from the legal experts and depending on it, we will decide further.”
Anti-dumping duty on import of solar glass from China
In 2017, the Indian Ministry of Finance imposed an anti-dumping duty on tempered glass (solar glass) imported from China in the range of $64.04 per metric ton to $136.21 per metric ton. The ruling followed the recommendation made by the Directorate General of Anti-Dumping & Allied Duties (DGAD, now DGTR) on June 20, 2017 and the final tariffs imposed by the Ministry of Finance were the same as recommenced by DGAD (now DGTR). This petition was also filed by Gujarat Borosil Limited.
The final conclusion was based on the fact that solar glass exported to India from China was below its associated normal value; the domestic industry suffered material injury and the material injury has been caused by the imports of the subject goods which were dumped on the markets from subject countries.
Anti-dumping duty on EVA Sheets
Last month, India notified the imposition of the anti-dumping duty on EVA sheets for solar modules imported from China PR, Malaysia, Saudi Arabia, and Thailand for five years.
In April 2018, the office of the DGTR had initiated an investigation on the import of EVA sheets for solar modules imported from China PR, Malaysia, Saudi Arabia, South Korea, and Thailand.
The petition was filed by RenewSys, Vishakha Renewables Private Limited, and Allied Glasses Private Limited.
Parties opposed to the anti-dumping duty have argued that the domestic industry is not utilizing its capacity efficiently. Indian producers are operating at only 25 percent capacity and producing only 4,151 metric tons (MT) against the total demand of 10,396 MT. Such a huge gap in supply and demand has caused an increase in the imports of EVA sheets from these countries.
“There is going to be an additional cost for manufactures of domestic solar modules after the imposition of anti-dumping duty on EVA sheets,” said Manjunatha D V, Managing Director of EMMVEE, one of the importers of EVA sheets.
Could such measures initiate a trade war? To this, he added “We don’t have enough capacity for exports. We mostly export to Europe and the United States, but that volume is negligible in comparison to China. Unless we have massive production capacity, there is no possibility of a retaliatory tariff.”
“The duty on EVA sheets is for five years unlike solar modules, which has a safeguard duty of only two years. Therefore, if the demand in India continues to be strong, foreign manufacturers may want to set up their plants here,” he opined.
Anti-dumping duty on wind turbines
The DGAD (now DGTR) recommended the imposition of anti-dumping duty on castings for wind-operated electricity generators originating or exported from China in August 2017.
The DGAD’s office issued the recommendation as part of the completed investigation into the anti-dumping petition filed by Larsen & Toubro.
Prior to that, India introduced reverse bidding in the wind sector, substituting the feed-in tariff in February 2017. According to Mercom India, approximately 10 GW of wind power projects have been auctioned in the country since the inception of the reverse bidding process.
Customs duty on EV parts including battery packs
The Indian government recently notified the implementation of ‘Faster Adoption and Manufacturing of electric vehicles in India Phase II (FAME India Phase II)’ with a total budget outlay of ₹100 billion ($1.41 billion).
However, to promote domestic manufacturing of electric vehicles and related parts, the government has proposed a roadmap to increase the customs duty on EV components under phased manufacturing program (PMP).
For example, the customs duty on lithium-ion cells for use in the manufacturing of the lithium-ion accumulator for electric vehicles will double from 5 percent to 10 percent. It will triple for battery packs for use in the manufacture of electric vehicles from 5 percent to 15 percent. The proposed duty will be applicable from April 2021.
Is such a measure the right approach to growth? To this, an industry expert said, “If we look back, the first PMP program was introduced in electronics in 2018, and today we manufacture more than 50 percent of electronic gadgets. For example, most of the mobile phones are ‘Made in India’. However, some internal parts are imported. Similarly, the government has the same intention to replicate the success in the EV segment. But the main issue is that we do not have some of the crucial raw materials, like lithium-ion or permanent magnets. Therefore, initially, we will have some dependency on overseas markets.”
“FAME-II has mandated that some parts should be localized for a certain period under component level localization. For batteries, it is July 1, 2019, and for motors, it is October 1, 2019. So, it is a little confusing what the government wants to promote, whether it is PMP or the localization program as both of them are totally different. Under the PMP, you have a phase-wise hike in duties and the government has given a one-year buffer in time, which starts from April 2020. In the case of component level localization, the process has already started in April 2019.”
He further added, “But no one in India, including Tata and Mahindra, is ready for a subsidy under the component level localization. The government should have a buffer period of one year in this case as well.”
The industry expert commented that while PMP is needed for the industry, the implementation of the program should be clear and have an achievable timeline.
In addition to these cases, Indian solar manufacturers eventually withdrew the anti-dumping petition filed with the Ministry of Trade and Commerce against solar cell and module imports from China, Taiwan, and Malaysia, which was filed on June 5, 2017.
We will get a clearer picture of all these duties and tariffs as they take hold. For now, it is a maze of duties and tariffs for the renewable energy sector as it tries to take off and reach the set goal of 175 GW by 2022.