Safeguard Duty on Solar Panels To Get Extended as the Government looks to Protect Industry

The Indian government imposed safeguard duties as high as 25% on imports of solar cells and panels to protect its domestic industry which was getting bankrupted by the import of millions of cheap solar panels from China. After WTO stopped the domestic content requirements (DCR) clause in domestic solar procurement tenders, the government imposed the duty to create a level playing field for domestic companies such as Tata, Vikram, Waaree, and Adani.

However, these safeguard duties were just for two years and will end in July of 2020. While some people have criticized these duties as imports still continue from China and other SE Asian countries, there is no doubt that it has helped the domestic producers of solar cells and panels some of which have expanded their capacity. While the solar power sector, in general, is facing challenges due to low-end user prices and financing issues, it is still expected that India will install 7-8 GW this year and around 10 GW next year. The small increase in domestic solar panel prices can easily be absorbed by the solar developers, especially as most of the power procurers are allowing the change in law conditions to increase the prices.

India is trying to desperately help its domestic industry from cheap imports from Asia as employment and economy shrink. Not only in the solar energy sector but also in other sectors, the government is imposing duties to allow domestic manufacturing to grow. India is a long way from achieving its goal of 25% of the GDP to come from manufacturing. The government has promoted domestic electronics manufacturing by putting 10% import duties and wants to push the growth of multiple new domestic industries such as lithium battery manufacturing, toys, etc.

Given the new government policies, it seems that the safeguard duty will most likely be extended and may also include other SE Asian countries such as Thailand and Vietnam which have shown solar panel imports grow exponentially as the Chinese companies have used their SE Asian factories to send equipment to India to escape the duties.