The Director-General of Trade Remedies (DGTR) has recommended the extension of the safeguard duty (SGD) on the import of solar cells and modules to India for another year starting July 30, 2020.

In its notice, the DGTR recommended a rate of 14.90% for the first six months and 14.50% for the subsequent six months on all solar cells and module imported from the China PR, Thailand, and Vietnam, noting that imports from all other developing nations will not attract the duty.

The safeguard duty will apply to solar cells whether or not assembled in modules or panels” classifiable under the Tariff Headings 85414011 and/or 85414012 of Chapter 85 of Schedule-I of the Customs Tariff Act 1975.

In its recommendation, DGTR added that two years of protection has already been provided, and the domestic industry has improved its position, but it still needs some time to adjust, so a one-year extension of the safeguard duty would be adequate.

In the report, the DGTR explained that the costs for solar power developers would increase because of the safeguard duty on solar cells and modules. However, the imposition of the duty would be in the public interest as it will prevent the erosion of the manufacturing base of the solar industry in the country which has made substantial investments, he added.

Mercom reported recently that the DGTR conducted an oral hearing where domestic and international industry representatives put forth their representations about the continued imposition of safeguard duty on the import of solar cells and modules to India.

Background:

The 25% safeguard duty, announced on July 30, 2018, was imposed on solar cell and module imports from China and Malaysia, to protect domestic cell and module manufacturers. The duty was set at 25% for the first year, followed by a phased down approach for the second year, with the rate reduced by 5% every six months until it ends on July 31, 2020.

The Directorate General of Trade Remedies initiated a review investigation in March 2020 to see if there was a need to extend the safeguard duty beyond its deadline following an application filed by the Indian Solar Manufacturers Association (ISMA). They sought for the duty to be extended by another four years. The domestic manufacturers filing the petition had provided import data released by the Department of Commerce from 2014-15 to 2019-20 (up to September 2019) for this investigation.

Mercom has previously reported that solar developers were struggling to get reimbursed for additional expenses that were incurred as a result of the duty imposition. They said that it has adversely affected their business, and consequently, the pace of project development in the country.

Industry Reactions

“We don’t think safeguard duty has much relevance now. In various statements by the government officials, it has been made clear that the duty on modules will be 20-25% for the first year and a long-term rate of 40% post that. This 14.9-14.5% SGD might become part of the overall duty of 25% over the next one year, or the Ministry of Finance may reject this proposal of DGTR and impose 20-25% basic customs duty for the first year,” said Parag Sharma, CEO of O2 Power.

“It is indeed commendable that the DGTR conducted an impartial hearing during this tough lockdown period. We were also part of the online hearing, and we are happy to accept the recommendation for the continuation of the safeguard duty for one year. It will indeed be helpful to the solar manufacturing industry in India,” Avinash Hiranandani, Global CEO and Managing Director, RenewSys, told Mercom.

“Safeguard duty recommendation is welcome, but 14.9% and 14.5% will not help the Indian manufacturers. That is because, with this percentage of duty, Chinese prices would still be comparatively very low.  In addition to the safeguard duty on modules, a basic customs duty of a minimum of 30% to 40% must be levied.  Apart from the safeguard and basic customs duty on modules, the government should provide pass-through benefit to developers even if they buy the modules from Indian manufacturers.  If it is not provided, then introducing these duties has no meaning.  Without this benefit, India’s forex outflow will continue at $50 billion in the next two years despite any kind of duty,” said Manjunath D V, Founder and Managing Director at Emmvee.

Talking to Mercom, Dhruv Sharma, CEO of Jupiter Solar, said, “The government’s intent is limited by the statute that the duty has to be lower than the previous duty (15%). So, we are happy with the direction, given the government’s limitation. We are hoping that the slew of measures that they will announce soon will give a boost to domestic manufacturing.”