Jubilee Post News & Views
Dr. Seema Javed
Improving the manufacturing capacity of solar cells and modules in the country has been high on the government’s list of priorities for some time now. After the brutal clashes between Indian and Chinese troops in Ladakh,the Indian government fired the first shots in the field of trade and stop imports of power equipment from China.
After the clash at the border, several states have moved to end existing contracts with Chinese firms, while as many as 50 investment proposals from Chinese companies have come under renewed examination.
The Ministry of Power announced that it would seek to hike the Basic Custom Duty(BCD) on solar cells and panels imported from China to 40% by 2022, once the current safeguard duty of 15% on solar cells and modules originating from Malaysia and China expires on July 31, 2020.
The BCD is seen largely as an extension of the safeguard duty that was in effect for the past two years with an objective of promoting domestic manufacturing of solar cells and modules.
Hence the imported solar modules and cells from China areset to become more expensive as the temporary window closes.This might have an impact on India’s renewable targets. Demand for PV modules, given the capacity addition targets, is more than what domestic capacity can cater to, and at prices that don’t allow bids of sub INR 2.5 as we’ve been seeing recently” says Kanika Chawla, director at the Centre for Energy Finance at the Council on Energy, Environment and Water (CEEW).
Over a longer term, however, the effects will be marginal, believes National Solar Energy Federation of India (NSEFI) CEO Subrahmanyam Pulipaka. “Nobody can say for sure how tariffs will evolve. Even with the reported record bids, there are several nuances of the contract that are not publicised in the media, which actually could increase effective costs. In the short term, module prices will increase and this might get reflected in bids in the near future. Right now, there are 111 projects worth 30GW of energy that have already been bid out. These are eligible for the “Change in Law” compensation, which the government has said it will consider case by case. Similarly, rooftop solar in the pipeline must also be grandfathered,” says Pulipaka.
Over a longer term, how tariffs develop depends on our domestic manufacturing capabilities. After all, energy transition without energy security means little.The safeguard duty, due to expire this month, was put in place two years ago to increase competition between domestic manufacturers and their Chinese and Malaysian counterparts.
The measure though has not yielded the desired results as growth in manufacturing capacity has remained minimal. “The safeguard duty failed to accelerate India’s solar manufacturing capacity, since the measure was undercut by the government’s move to grandfather projects that had been affected and provide funding for the price difference due to the duty.
Similarly, Chinese manufacturers also managed to offset some of the cost increase from the duty by providing cheaper rates,” says Vibhuti Garg, a senior energy specialist at the International Institute for Sustainable Development (IISD).
However, The BCD regime is more permanent than the safeguard duty and can be revised upwards, and more countries could be brought into this net, so solar developers and manufacturers will consider the BCD more seriously in their planning processes than they did the safeguard duty.
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The COVID-19 pandemic has also been a game-changer since supplies from China were the first to be hit, the vulnerability of the supply chain has re-awoken solar developers to the need for strong domestic manufacturing capacity.
(author is an Independent Journalist, environmentalist& Strategic Communicator for climate change)
