Solar safeguard duty extension takes industry by surprise

New Delhi: The government’s one-year extension of the safeguard duty (SGD) on Chinese solar power equipment till July 29, 2021 has taken the solar industry by surprise. Industry executives said that instead of creating such fencing, the focus should be on reducing the cost of domestic manufacturing.

However, associations such as the National Solar Energy Federation of India (NSEFI) have welcomed the decision.

“The extension of SGD has come as a surprise to the industry though there have been talks of imposition of basic customs duty (BCD) owing to the ongoing border related tension with a key neighboring country,” said by Sanjeev Aggarwal, Founder and CEO, Amplus Solar.

Pinaki Bhattacharyya, co-founder and CEO, Amp Energy India resonated with this view and said that the SGD extension was originally notified for only two years.

“Instead of imposing trade barriers, the government should focus on reducing the cost of domestic manufacturing of modules and cells with cost subsidies, interest subversion, and lower power cost,” he said.

According to Aggarwal, investors want certainty on how much BCD would be there and what would be the time schedule, as in the absence of this clarity, it is almost impossible to plan projects and establish their commercial viability.

“The BCD exemption should continue else it will definitely slow down the industry further. The power generators are also ‘Making power in India’ and this simply increases the power cost for the consumers that include the industry and the discoms. This would eventually pass to the consumers at large,” said Bhattacharyya.

He added that in these times when discoms and the industry are looking to reduce costs, such a move would have a negative impact on far too many domestic manufacturers just to provide benefit to a few companies.

Renewable energy minister R K Singh had recently said that BCD of 15-20 per cent on solar equipment would be imposed in August, however, an official notification on it is still awaited.

According to NSEFI’s Chairman Pranav R Mehta, the SGD extension was required for the country. He, however, added that grandfathering for the projects in the pipeline including for the third-party PPA should be taken care of by the government as already mentioned by the renewable energy minister earlier this month.

The finance ministry’s notice has no mention of the ‘grandfather clause’, which allows renewable energy companies to claim reimbursements on the duty they have paid while importing equipment from China.

The Ministry of Finance in a notification on Wednesday had imposed a duty of 14.9 per cent on solar imports for six months till January, 2021, which would slightly decrease to 14.5 per cent in the following six months to give a push to domestic manufacturing of equipment.

Last week, the Directorate General of Trade Remedies had recommended continuation of the safeguard duty on solar cells and modules.

The SGD was initially levied in July 2018 on Chinese and Malaysian solar products to prevent dumping of Chinese solar equipment in the country. It was introduced at a rate of 25 per cent initially, which reduced to 20 per cent on July 30, 2019, and to 15 per cent on January 30 this year.

Earlier this week, the Reserve Bank of India Governor Shaktikanta Das had also said that the country should start investments in creating domestic manufacturing capacity for solar panels.