THE SOLAR WAR

Trade dispute over domestic content requirement between India and the US continues to grow
 More than 70 per cent of the solar power projects in India are built on imported content. There is a need for India to support its own manufacturing capabilities as domestic equipment capacity is inadequate to meet the demands of the country’s ambitious solar power mission. In a government’s bid to encourage domestic solar cell industry, India has imposed dumping duty on solar panel imported from the US, China, Malaysia and Taiwan.
In a reflex action, the US has filed a complaint in the WTO against India’s domestic content requirement (DCR) under the country’s Jawaharlal Nehru National Solar Mission (JNNSM). US claim that the DCR violates WTO agreements such as national treatment principle and agreement on trade related investment measures. The WTO has set up a dispute settlement panel to examine a complaint by the US against India’s domestic content requirements under the country’s solar power programme. The question arises how the ongoing US-India solar tussle will affect the solar power industry in India?
Commenting on the issue Ketan Mehta, Managing Director, Rays Power Infra says, “The Indian government is trying to endorse and enhance the Indian GDP. This would be getting worse if not sorted out soon, as India’s planning to install 20 GW within the next decade to provide uninterrupted power supply.”
ImpactLike every coin has two sides there are two ways of looking at this issue, the first anti-dumping duty could be one of the major concerns that solar power industry is facing and may have an adverse impact if implemented. Second, the association claims that anti-dumping duties would create five lakh jobs as Indian manufacturers expand their capacity and encourage domestic players who have either shut down their manufacturing facilities or have idled over half of their capacity to promote their own manufacturing capabilities.
Mr Mehta says, “In the current scenario, the domestic market is not well equipped and does not meet the standards of growing requirements. The capacity is very poor and whatever little exists is already tied up with the national solar mission. If anti-dumping duty is to be imposed the solar segment of the renewable energy sector will come to a standstill, which will make the already capital intensive solar power sector more unviable than before.”
He further adds, “We will face a massive setback in inflow of funds from investors as they will be reluctant to invest due to huge initial capital investment that this sector demands. Things will worsen if government imposes this additional anti-dumping duty which would result in doubling up the investment cost.”
With reference to media reports, if anti-dumping duties were to be implemented the solar panel imported from US would incur an additional $0.81 per KW which would result in increased investment cost.
Vineet Mittal, Vice Chairman Welspun Renewables Energy Pvt. Ltd. says, “Efforts of India to use manufacturing sector and export for immediate economic rejuvenation and growth will suffer a setback since imposing anti-dumping duty at this juncture will have a retrograde impact on our international trade relationship in multilateral forums viz. WTO especially with countries like China, USA, Malaysia, Taiwan etc. that are our target countries for export.”
He further adds, “The immediate impact of the anti-dumping duty would be that about 700 MW solar projects awarded through bidding under JNNSM and various state governments would have to be abandoned. Already 1,000 MW has got stranded.”
Despite reservation of 375 MW solely for domestically manufactured modules, indigenous companies have not been able to procure order even to the extent of 200 MW, indicating possible derailment of solar power mission.
Generation of power by developers is a pass through activity and ultimate impact comes to the power distribution companies and thereby on the energy consumers. It is assessed that the impact of 0.60 US$ per watt anti-dumping duty on cost of production of power shall be around ` 3 per unit translating to additional project cost of ` 3 crores/MW. Thus considering 20,000 MW targeted production of power in the country as part of the Solar Mission, the proposed anti-dumping duty implies increase in project cost by ` 60,000 crores that needs to be borne by distribution companies, the government or the public in the form of higher cost of power or the subsidy. This will increase the input cost of industry thus reducing the profitability and possibly productivity of the industry.
SolutionPower Ministry is reviewing the anti-dumping duty proposal as the country does not have sufficient manufacturing capacity. India is expecting to grow up to 20,000 MW grid connected solar capacity in the coming years. The proposed anti-dumping duty could hamper India’ growth in solar energy domain, hence suitable solutions should be taken for unobstructed growth.According to Mr Mittal, “The way forward for the growth of indigenous solar manufacturing industry is not through protectionist measures like imposing steep duties on domestic content. Instead the government should focus on creating an ecosystem. As the solar technology gets updated continually, Centers of Excellence should be set up for undertaking R&D in PPP mode to drive the growth through innovation. They can focus on cutting edge inventions that should include the complete value chain of solar module and other components.”
He further adds, “Indian companies should be driven for efficient production to match the international price and thus contribute to the exports. Foreign companies exporting to India should be encouraged to invest in the country through FDI route in possible combination with SEZ and other economic policies to establish India as an export hub for modules and other component.”
Experts suggest, the policy has to be made on the basis of mutual benefits. India is still struggling to meet the demands of the current requirements from the solar player’s therefore India should be open to accept foreign importers until it is equipped enough to meet the demand itself.
“US should reduce other duties which they impose on Indian steel pipe products. If the dispute is not settled by the two countries, WTO would impose trade sanctions on India where the consequences would be gigantic for India to face. An alternative solution for the situation is 20 per cent of solar panels can be procured from Indian manufactures and rest is imported from other countries without duties. In the meantime, Indian government should also strengthen its manufacturing sector by providing infrastructure with tax credits which would prepare us to meet 100 per cent procurement from the domestic market,” concludes Mr Mehta.
—————–If the dispute is not settled by the two countries, WTO would impose trade sanctions on India where the consequences would be gigantic for India to face.
Ketan Mehta, Managing Director, Rays Power Infra———————————-Indian companies should be driven for efficient production to match the international price and thus contribute to the exports.
Vineet Mittal, Founder President, Solar Power Developers Association (SPDA)

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