Will US solar tariff import benefit India.
By Hartek Singh, Chairman and Managing Director, Hartek Group
US President Donald Trump’s decision to impose a 30 per cent tax on imported solar panels in the wake of flooding of the country’s markets with cheap solar panels produced by Chinese-owned solar firms across Asia will come as a major boost for solar panel manufacturers in the world’s largest economy. The move is expected to impact India, which is also contemplating anti-dumping measures against solar equipment from China, Taiwan and Malaysia, favourably.
India is also considering a levy of 70% provisional safeguard duty on imported solar panels and modules from China and Malaysia, as recommended by the Directorate General of Safeguards. However, Crisil has warned that the move will put about 3-GW solar projects worth over Rs 12,000 crore at risk. Since these projects were auctioned at low tariffs, any increase in equipment costs as a result of the safeguard duty would pose problems to developers in servicing debts.
The proposed duty will push up project costs by 25 per cent and lead to a matching increase in tariffs, making solar power a less attractive proposition for discoms. Modules make up for about 55 per cent of the total cost of a solar project, and 80 per cent of them are being imported from China and Malaysia. Any anti-dumping duty on imports of solar cells and modules can make domestic module manufacturers uncompetitive. Instead of imposing a steep anti-dumping duty, the government should increase the domestic manufacturing capacity and improve the quality of panels produced by Indian manufacturers under the Make in India initiative. It should do everything to maintain the price competitiveness of solar power so that the tariffs do not go beyond unmanageable levels. Or else, the 100-GW target by 2022 will remain only a pipe dream.
China has a solar module manufacturing capacity of around 70 GW per year, and majorly caters to the Indian, US and Chinese markets. With the action on the green energy front likely to slow down in the US, China’s solar equipment makers may adopt a more competitive stance on pricing to push demand. This will be in sync with India’s target of achieving 100-GW installed solar power capacity by 2022.
The US President’s decision may make Chinese manufacturers further reduce their solar module prices to drive sales in India since the US market, which as it is accounts for only 12 per cent of the solar demand globally, may not hold the same attraction for them any longer.
Indian developers are upbeat about the development. They are expecting a steep fall in prices of Chinese solar panels. However, some believe that the US decision will also have a bearing on India’s trade investigation and decision-making process.
From the global perspective, Trump’s decision to impose a prohibitive tax on Chinese solar panel imports is not likely to have any major impact on international demand-supply and price scenario. Leading strategic solar consulting firm Bridge to India has estimated that even a 15-20 per cent volume reduction would result in just 2 per cent drop in global demand.