30 May 2014 | Tobias Engelmeier
Anti-dumping duties threaten to torpedo the Indian solar market at a time when the new government has made clear its intention to grow solar. They are an ill-conceived and ill-timed vestige of the previous government and serve a very small section of the Indian solar industry at the detriment of the majority of the rest, the power consumers and the taxpayers.
- Solar will become more expensive (by at least 70 paisa per kWh) and up to 1 GW of existing projects could be scrapped. This will set the solar market back by 2 years
- A small group of Indian industry players will win in the short term. The majority of Indian industry players (including manufacturers) will lose. In the long term, all lose
- India should focus on making solar cheaper, not more expensive. Supporting domestic manufacturing is possible under this premise, e.g. by extending cheap loans
The Ministry of Commerce in India has proposed anti-dumping duties of between $0.11-0.81 on cells/modules imported from China, US, Malaysia and Taiwan (currently about 80% of modules used in Indian projects). The decision is based on a very narrow data set from two years ago and now threatens to affect the entire industry for years to come. In addition, the proposed duties would be very detrimental to India’s larger energy, investment, development and growth story.
The duties will result in an increase in the cost of solar power in India of at least 10% or 70 paisa per kWh. Just for the planned new government-incentivized projects of 7.5 GW by 2017, this would cost the Indian power consumer or taxpayer around INR 3,581 cr ($0.6 bn).
But more likely, anti-dumping duties would hit investor confidence badly and bring the market to a halt, setting it back by at least two years. Up to 1 GW of solar projects could be scrapped. Project developers will be forced to reconsider their plans and commitment to the Indian market.
International investors and banks, just gaining cautious new confidence in the Indian market, will be put off as a result. The duties will even harm the majority of domestic module manufacturers, who are almost entirely dependent on cell imports (mainly from China). They will find it very difficult to sell in the India. At the same time, they (like Indian cell manufacturers) may also be exposed to retaliatory measures in export markets.
The negative sentiment will affect the entire solar eco-system in India including EPC contractors, installers and thousands of solar entrepreneurs selling solar products and services across the country. In addition to harming the solar industry, the anti-dumping duties will have a broader negative effect in the country. More expensive solar can contribute less to ameliorating India’s power deficit and energy import woes. Millions of un-electrified households will not get access to a solar solution.
The duties will arguably give a short-term boost to the 3-5 Indian solar cell manufacturers whose sales in India will increase. However, in the long term, they will also be hit by a decline in demand for solar.
We doubt that a one-off measure such as anti-dumping duties would entice investors to set up more manufacturing capacity in India. What would really drive investment into manufacturing in India is the creation of a vibrant, large solar market and long-term measures to boost competitiveness of Indian manufacturing: for example, a consistent and transparent policy framework, investment in R&D and engineering skills development, or the creation of special investment zones with fast track project clearances. India needs to focus on making solar cheaper, not more expensive.
At this point, the anti-dumping duties can only be stopped by a strong political intervention in this narrow, quasi-legal process, in the name of the larger public good.
Tobias Engelmeier is the Director and Founder at BRIDGE TO INDIA.