The United States, the European Union, and other developed countries will be on the receiving end of the 25 percent safeguard duty if the Government of India accepts the recommendations made by the Directorate General of Trade Remedies (DGTR) in relation to imported solar components (Modules, Cells).

Earlier this week, after examination and analysis of submissions made by interested parties, the DGTR recommended a 25 percent safeguard duty on solar cell and module exports from China and Malaysia for the first year, followed by a phased down approach for a second year. DGTR clarified that imports from any other developing nation except China and Malaysia did not exceed 3 percent individually and 9 percent collectively and hence would not attract a safeguard duty.

In the first six months of the second year, the safeguard duty will be reduced to 20 percent, payable by exporters to India. In the latter half of the second year, the safeguard duty will be reduced to 15 percent.

DGTR in its recommendation had said that no duty will be levied on companies from any other developing countries which implied developed countries may be on the list.

When asked about developed countries, a DGTR official said, “The countries that are on the list of developed economies of the United Nations, World Trade Organization (WTO) will have to pay the safeguard duty if it is imposed. However, developing countries other than China PR and Malaysia will be exempt.”

In short, the DGTR has recommended that a safeguard duty be levied on developed economies, and only China and Malaysia from the list of developing countries as defined by the UN.

According to the United Nations development and policy analysis division report from 2014, there are 37 countries that are defined as developed economies listed in the table below.

According to export/import data published in the Mercom India Quarterly Market Update, only 13 of the nations listed as ‘developed’ countries export solar cells/modules to India. Imports from these countries totaled just over $50 million, comprising just over 1 percent of the $3.8 billion in solar imports in FY 2017-18.“The tariff recommendation on developed countries would be largely meaningless considering the small amount of solar imports. It should be noted that India is now exporting more solar to the U.S. than it imports from there.  In fact, in FY 2017-18 India exported $40 million worth of cells and modules to the U.S., compared to just under $2 million exported from the U.S. to India.

As more Indian manufacturers look to increase their module exports and develop new markets, imposing duties on the same countries may attract unwanted attention from them,” said Raj Prabhu, CEO of Mercom Capital Group.

Earlier this year, the U.S. had exempted one hundred countries including India from levying a 30 percent safeguard duty on solar imports in a section 201 trade case. However, exports to the U.S. from exempt countries is limited to 3 percent per country and 9 percent in total for all exempt countries.

Commenting on the development, Rohit Kumar, the head of Indian subcontinent at Renewable Energy Corporation (REC) told Mercom, “It is too early at the moment to fully gauge the effect of this decision. However, since the proposal is pretty similar to the recent U.S. trade case, the outset will surely lead to a hike in the project costs across the supply chain in the industry and will negatively affect the overall market prospects and sentiments, like we can see in the U.S. for 2018. By blocking manufacturers from developed nations, this move will penalize in particular advanced technologies and therefore curtailing the choices available to the discerning Indian customers who appreciate quality”.

Case Background

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

The recommendation was the result of an investigation carried out by DG Safeguards based on the petition filed by the Indian Solar Manufacturers Association (ISMA) on behalf of domestic manufacturers. These manufacturers included: Mundra Solar PV Limited, Indosolar Limited, Jupiter Solar Power Limited, Websol Energy Systems Limited, and Helios Photo Voltaic Limited.

The companies claimed that they collectively manufacture more than 50 percent of all solar cells manufactured in India. The petition requested an immediate application of a Safeguard Duty for four years.

At a public hearing held in June 2018, both manufacturers and developers presented extreme scenarios to prove their respective case, according to participants at the hearing.

In the end, this is just a recommendation by DGTR and the ultimate decision will be taken by the board of secretaries consisting of various ministries who evaluate the decision hopefully with the big picture in mind.