India’s Domestic Protectionist Policy Means Its Solar Industry May Not Qualify for Subsidies Using Imported Solar Cells

published: 2019-11-25 11:34 | editor: | category: News

Still remember the import duty imposed on foreign-made solar cells by the Indian Ministry of Commerce and Industry back in 2018? To protect the domestic photovoltaic industry, the Ministry levied a 25% first-year tariff on imported cells. Recently, India is rolling out a brand new set of policies that will proactively reduce the country’s reliance on imported cells. The idea here is to bolster the Indian solar cell manufacturing industry.

The latest decision by the Indian Ministry of New and Renewable Energy (MNRE) to protect the domestic upstream solar industry redefines the meaning of the clause “made in India”. Being made in India, with respect to solar components, now refers only to Indian-made modules with undiffused silicon or black wafers.

The MNRE has previously introduced several schemes to increase the user base of solar panels, such as the KUSUM comprehensive solar farming protection and improvement initiative (also known as Kisan Urja Suraksha Evam Utthan Mahaabhiyan in Hindi). The project was launched with a budget of US$4.99 billion in March 2019 to help Indian farmers install solar water pumps and solar panels. Ultimately, the Ministry hopes to have the total user base generate 25,750MW of electricity by 2022.

Of course, not all manufacturers are covered under the MNRE’s newly minted schemes. Case in point, manufacturers must prove that they use only domestically produced solar cells. According to the MNRE, if the cells used in solar modules are not made in India, then the production of these solar modules is of no benefit to the domestic industry and thus against the spirit of KUSUM. The Indian government hopes to eschew the overreliance on imported solar cells while at the same time incentivizing the development of India’s upstream solar industry.

If Prime Minister Nadrendra Modi’s ambitious renewable energy strategies come to fruition, India can look forward to lowering its greenhouse emissions by 33-35% by 2030. Furthermore, 40% of the country’s electricity will be generated from sources other than fossil fuels. Modi hopes to build an additional 175GW of renewable energy capabilities, including 100 GW of solar energy and 75GW of wind energy, by 2020.

India is making good progress in developing its green energy capabilities. Accordingly, the country has become the second largest solar energy market in the world; it is able to significantly reduce the cost of renewable energy production and reach a 70GW installed base of green energy equipment, which more than doubled the 34GW capacity in 2014. Moreover, the government is looking to set a 225GW goal for 2022.

 

While focusing on renewable energy development, the Indian government is also giving incentive to domestic industries and new players alike. It has been making plenty of moves in recent years, such as the two-year protective tariff levied against foreign-made solar cell products from China, Malaysia, and other countries. Enacted in July, this tariff takes the form of a 25% ad valorem tax in the first year, a 20% tax in the first half of the second year, and a 15% tax in the second half of the second year.

In the beginning of 2019, India imposed an anti-dumping duty of up to US$1,559 on solar module-use ethylene-vinyl acetate (EVA) sheets imported from China, Malaysia, Saudi Arabia, and Thailand. EVA sheets are thermoplastic materials used in the packaging of solar panels for the dual purposes of raising solar module efficiency and protecting against damages from environmental and climate-related causes.

But it remains to be seen whether India’s protectionist policies can truly work as intended for the domestic industry. Many solar companies in the Micro, Small, and Medium Enterprises segment in India have expressed the opinion that these policies create more problems than they solve. Since domestic solar cell and solar module manufacturing capabilities are extremely limited in India, India’s solar industry as a whole may be unable to meet the government’s projected installation numbers.

Many countries today are increasingly focused on protecting their domestic solar industries. For example, the U.S. government announced in January 2018 that imported solar modules were now taxable under Section 201 of the Trade Act, up to a maximum of 30%. The Solar PV Generation System Association of R.O.C. believes that the Taiwanese government should react accordingly. According to the Association, imported modules cost less than Taiwanese-made ones, which are high-quality, so Taiwanese solar modules should be subsidized when calculating feed-in tariffs.

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