Energetica India Magazine nº88 March-April 2020

SOLAR POWER Has the Solar Trade Duty succeeded in supporting the Indian Solar Manufacturing? In July 2018, the Indian Ministry of Fi- nance imposed a two-year trade duty of 25% on imported solar cells and modules from China and Malaysia. (The imposed duty of 25% was for a period of one year, later to be scaled down to 20% and 15% for the first six months and remaining six months of the second year respectively). The uncertainty of this trade duty has been one of the most serious impedi- ments to India’s renewable energy mo- mentum, both in terms of the quantum of unexpected increases in costs but also due to the lack of clarity in how it was introduced. The objective of the imposed duty was to make Indian domestic manufactured solar cells and modules competitive against cheaper imported Chinese and Malaysian modules. (Since first elected in May 2014, the Prime Minister Naren- IEEFA Report dra Modi-led BJP government has put an emphasis on growing local manufac- turing industries under its ‘Make in India’ initiative.) Between FY2014/15 and FY2017/18, some 80-90% of India’s imported so- lar modules came from China, meeting more than 90% of India’s requirements. India’s current manufacturing of do- mestic cells is roughly 4GW, far from sufficient to meet annual solar installa - tion demand of 8-10GW. Being highly dependent on imported solar cells and modules, India’s trade duty imposition of 25% meant a subsequent hike in the capital costs of building solar power, which increased the required tariff by 10-15%. The duty also impacted the pace of so- lar capacity installations in two stages. In the first year, there was a period of confusion among developers from when domestic solar manufacturers filed a pe - tition in favour of imposing a trade duty to when the duty was finally imposed. During this period, solar capacity ten- ders were undersubscribed as devel- opers awaited a decision. After the duty was finally imposed, tenders previous - ly awarded at record low tariffs in the range Rs2.44- 2.60/kWh had become unviable using either local or imported solar modules. Whilst the 25% trade duty has slowed down capacity commissioning of so- lar projects and increased tariffs, any material improvement in the scale of domestic manufacturing is yet to be experienced. As it stands today, Indian solar module manufacturing capacity is nowhere near sufficient to supply the quality and quantity of modules required to build the targeted 100GW of solar ca- pacity by 2022. 32 energetica INDIA- March-April_2020 Figure1: Growth of Solar Cells Imported into India Source: Indian Ministry of Commerce, IEEFA Impact of Trade Duty in Numbers The trade duty has impacted India’s importation of solar cells and the overall solar sector in the following ways: 1. The number of solar cells imported into India did not, as hoped, decrease due to the trade duty. Rather, import numbers in- creased by 322% in FY2018/19 compared to figures in FY2014/15.