The Ministry of New and Renewable Energy (MNRE) has issued an advisory asking the stakeholders to beware of two Chinese companies – CSUN Trading (Hong Kong) Co. Ltd. and CEEG (Shanghai) Solar Science Technology Co. Ltd.

In its advisory, the MNRE noted that the companies that had entered into module supply agreements with CSUN and CEEG had approached the ministry stating that the two companies breached the contracts by not supplying the modules by the terms of the agreement and did not return the advance paid to them.

The aggrieved parties also brought to MNRE’s notice that in January 2019, the Singapore International Arbitration Centre had settled a similar matter in favor of an Indian company. The matter involved CSUN and CEEG (both are part of the same group). CSUN had acquired 100 percent stake in CEEG (Shanghai) Solar Science & Technology Co., Ltd and CEEG (Nan Jing) New Energy Co., Ltd in 2010. CSUN was delisted from NASDAQ in 2016 as it failed to regain compliance with the Listing Rule related to the maintenance of minimum Market Value of Publicly Held Shares of $15,000,000 within a compliance period of 180 calendar days.

The ministry has observed that such breach of valid contracts and not supplying modules on time are intolerable. Further, it approached the Ministry of External Affairs (MEA) to bring to the attention of the Chinese authorities the breach of contracts by CSUN and CEEG.

The MEA, at the behest of the MNRE, asked the Chinese authorities to order the defaulters to meet the contractual obligations to the Indian companies and to honor the arbitration award by Singapore International Arbitration Centre.

The Consulate General of India, Shanghai, informed that the above-mentioned Chinese companies are high-risk companies and have over 160 court cases against them, mostly for breach of contract with millions of RMB in compensation amount.

Keeping this in mind, the ministry has advised the stakeholders to contact Embassy of India, Beijing, China or the Consulate General of India, Shanghai, to verify the standing and the reputation of various Chinese companies before placing any orders so that such incidents can be avoided.

The MNRE has also requested the Department of Financial Services, Ministry of Finance, to take appropriate action, by informing all banks, lending institutions, to avoid any possible non-performing assets, regulatory issues in the future.

When contacted, a market insider said, “It took the industry almost 6-7 months to reach this stage and get the MNRE’s support. This Chinese group is a repetitive defaulter. They took many small and big contracts and then defaulted on them all. Now, this order will put pressure on the firm to honor contracts. Meanwhile, the Indian companies are also undertaking parallel negotiations with CSUN group to supply the modules and to turn this whole issue around.”

“If CSUN doesn’t supply, then we can undertake international arbitration or approach the Chinese courts for relief,” added the market insider.

When contacted, a government official informed that even procurers need to be mature and act according to their due diligence and perform checks on the firms they are entering into contracts. After this strongly-worded order from the government, if the company in question wants to remain an active player in the Indian market, it will have to honor its old contracts. Else, it is likely to lose out on a huge, booming solar market.“

India was the third largest solar market behind China and the United States with 8.3 GW of solar PV capacity installed in 2018. Japan and Germany were the fourth and fifth largest solar markets in the world.

This action by the ministry sends a strong message to the defaulters in the solar industry. However, solar procurers are eventually responsible for their own actions especially if purchasing decisions are based on just the lowest price instead of quality and reputation of the vendor.