The ongoing anti-dumping investigation has domestic manufacturers wondering about their fates. As the country looks toward a greener future with an expansion of the renewable energy sector in coming years, local manufacturers remain in limbo awaiting the anti-dumping decision on tariffs, which they feel would boost their manufacturing activities.
However, the levy of anti-dumping duty (ADD) on imported solar cells and modules from China, Malaysia, and Taiwan may come as a sigh of relief for domestic manufacturers, it might prove to be detrimental to the country’s solar industry in the long run, according to Dr. Rahul Kapil, the India chief of Longi Solar, a leading solar cell and module manufacturer.
In a conversation with the Mercom news team, Kapil shed some light on the intricacies of the solar sector and the probable future of the country’s renewable industry. Here are excerpts from that interview:
What are your thoughts on the potential for anti-dumping duties?
I would like to begin with the case of India. While levying an anti-dumping duty might benefit local manufacturers for some time, it is not good for the country’s solar sector in the long run and the country at large.
Most domestic manufacturers currently run on old technology and are not ready to move on. There are many factors that contribute to costs, like the materials used, the efficiency, and the kind of technology used. Depending on one’s level of efficiency, one can optimize costs and give the accrued benefits to consumers. Therefore, in a nutshell, an anti-dumping duty would offer a temporary breather for a few manufacturers, but it wouldn’t be very good for the solar manufacturing industry. As far as Longi is concerned, we have already signed a memorandum of understanding (MoU) with the Andhra Pradesh government to set up our factories in the state. Hence, the outcome of the anti-dumping investigations won’t have much of an effect on us.
Are you saying that the anti-dumping investigation led to your recent expansion plans in India?
No, not really. Reports about the imposition of an anti-dumping duty began doing the rounds way back in 2014. Longi ventured into solar module and cell manufacturing in 2015 and we signed the MoU with the Andhra Pradesh government that same year. So, our expansion plans don’t have any relation to the ongoing anti-dumping investigation. India is a huge market for us and we are also the participants in the country’s ‘Make in India’ program.
What do you think about the ease of doing business in India? Since you have manufacturing units in other countries too, how does India compare?
The government here is trying to push domestic manufacturing. However, there are many challenges in the country and the government is gradually trying to overcome them.
If you look at the last few years, the ease of doing business index has risen and that is a positive development for us. The state governments are also actively working toward promoting the same. For example, the Andhra Pradesh government has been very positive in the way they have been handling our projects.
However, there are other problems associated with the country’s business scenario which are slowly settling down and would eventually ensure a brighter future for us.
What are your thoughts on the Goods and Services Tax (GST) and how has it affected your business?
Earlier, we only had to pay the Value Added Tax(VAT) in a few states. However, with the implementation of the GST, we now have to pay 5 percent which might be a challenging price for domestic manufacturers and developers. The modules attract a GST rate of 5 percent, but then there are varying rates of interest for all of the input materials required. Because of these reasons, we will not be able to take full advantage of the GST.
Do you have any comment on the trend of module prices?
A few factors have led to the lower cost of modules, for instance, improving quality and increased efficiency is resulting in cost savings. Also, manufacturers are climbing the learning curve. Earlier, there were not too many packages and the yields were not good. However, these things have improved with time. It’s an ongoing process.
You might be aware that the United States has imposed a duty on polysilicon. Now, this would increase the cost of everything else in the value-chain, resulting in a change in prices. So, it is a cyclical phenomenon. However, I am not denying that a few companies might just sell sub-standard products to clear their inventories, which results in the decline of prices.
What are your thoughts on the current solar tariff trend in the country?
Prices in 2019 will depend on the finances of the developers. For instance, if one manages to raise money in India, it would come at a higher interest rate whereas if one decides to raise the funds in other countries, they would come at a lower cost. Accordingly, the PPA prices would change. It also depends on the developer’s appetite and what return on investment (ROI) they are comfortable with. So, there are a range of factors that determine PPA price. Factors like ADD and the government policies will also be factors for determining the PPAs.
Can you elaborate on your expansion plans?
In the first phase, we are going to produce 500 MW of cells and modules each. Construction of our new manufacturing units is ongoing and will take another year. I think we will be operational by the end of 2018 or the first quarter of 2019.