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    Duty on imported solar cells: Boon for manufacturers, bane for consumers?

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    Duty on imported solar cells: Boon for manufacturers, bane for consumers?

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    India has imposed safeguard duty on solar cells imports from China and Malaysia for two years to protect domestic players from steep rise in the inbound shipments of the product.

    India has imposed safeguard duty on solar cells imports from China and Malaysia for two years to protect domestic players from steep rise in the inbound shipments of the product.
    This comes following recommendations by the directorate general of trade remedies (DGTR), under the union commerce ministry.
    As per the notification of the union finance ministry, 25 percent safeguard duty have been imposed for July 30 to July 29, 2019, which will gradually come down to 20 percent during July 30, 2019 to January 29, 2020 and 15 percent during January 30, 2020 to July 29, 2020.
    "After considering the said findings of the DGTR...hereby imposes on subject goods (solar cells whether or not assembled in modules or panels)...when imported into India, a safeguard duty," the notification said.
    An application dated November 28, 2017 has been filed before the DGTR on December 5, 2017 by the Indian Solar Manufacturers Association (ISMA) on behalf of five Indian producers — Mundra Solar PV Ltd, Indosolar Ltd, Jupiter Solar Power, Websol Energy Systems, and Helios Photo Voltaic — seeking imposition of safeguard duty on the imports.
    The country has launched the world's largest renewable energy expansion programme and aims to achieve 175 GW capacity of energy by 2022.
    India's solar installed capacity has grown by 370% in the last three years and to meet this rapid growth, the solar park developers rely on cheaper imports.
    Currently, solar plant developers meet 80 percent of the demand by importing solar cells and modules from China and Malaysia as local manufacturers do not have sufficient capacity to meet their needs.
    After US and European Union, India is the third largest consumer of solar cells and modules. China, which currently owns 70 percent of global cell manufacturing capacity, has been dumping cheaper cells into India.
    For example: Between January and March 2018, country imported solar cells at the rate of 1,200 MW per month from China. To put it into perspective, India had installed solar cells worth 10,000 MW in FY18.
     
    Domestic manufacturers currently have cell manufacturing capacity of 3,200 MW and module capacity of 8,500- 9,000 MW per annum as country is expected to install 15,000-18,000 MW solar capacity in FY19 to stay on course of its target.
    Given the opportunity, the domestic manufacturers are looking to rapidly scale capacity and double it over next 6-12 months.
    Industry experts believe that the domestic cell manufacturing capacity could reach close to 10,000 MW over the course of next 12-18 months.
    Key players like Adani Green Energy, Tata Power and JSW Group are looking to invest to set up new photovoltaic cell capacities.
     
    Though the move is positive for Indian cell manufacturers, it might be a worry for the solar park developers.
    Solar park developers had been opposing the move strongly on the grounds that it would raise tariffs, as they would have no option but to pass on the extra charge to discoms and consumers.
    “The average solar tariff was aggressive, having touched Rs 2.44 per unit a few times," said Rahul Prithiani - director, CRISIL Research.
    As per experts, the move will lead to increase in project capital cost by 17 percent in immediate term, which would mean a 25-50 paise hike in solar tariff, from an all-time low at 2.44 per unit.
    “But an increase in capital costs means solar becomes less competitive as compared to wind power, which averaged Rs 2.80 per unit in fiscal 2018 and has also seen tariffs as low as Rs 2.43 per unit," Prithiani said.
    "However, overall capacity additions may not be materially impacted as cost competitiveness of solar with other sources, barring wind, remains high, though there could be some near-term delays in project implementation," Prithiani added.
    Gujarat Borosil, solar glass manufacturer, said the company has decided to double the capacity to one GW in January 2018 itself.
    Indosolar, solar cell maker, told CNBC-TV18 that the company is looking to ramp up capacity to 500 MW from 250 MW capacity.
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