India’s Tryst with Safeguard Duty

On the eve of independence in 1947, Jawaharlal Nehru, India’s first prime minister, spoke of a “Tryst with Destiny”. Our vast, diverse and impoverished country had set itself on the path of democracy and development. Seventy years later, India remains a democracy and has progressed with development. The record is not without blemishes. Yet Indians have reason to feel proud of what they have achieved.

As was in terms of the Independence struggle, so stands India’s record in terms of its remarkable progress in in the Solar Industry.

The country’s solar installed capacity reached 20 GW in February 2018 expanding 8 times from 2,650 MW in May 2014 to over 20 GW as of February 2018. The 20 GW capacity addition which was initially targeted for 2022 was achieved by the BJP’s newly formed government four years ahead of anticipation, as the country now gears up to strive to achieve the 100 GW  target that has made India’s Solar Industry the Global epicenter of Investment Interest in Renewables.

However such a massive solar push across such a large landmass with complex regulations does not come without challenges, as fears persist over a potential Indian ‘solar bubble’ with prices offered in recent solar auctions appearing to be unsustainable and driven more by the fear of missing out rather than prudent financial engineering.

While defenders of such low prices argue that significant cost reductions for Chinese-made solar PV panels make aggressive price bids such as the Bhadla Solar Park tarrif of  Rs. 2.44/ unit feasible – but this over reliance on Chinese manufacturers is more than a potential weakness, as it ties India’s solar development fortunes to unpredictable panel prices.

And herein lies the challenge faced by our country’s leadership in building a sustainable industry rather than one dependent on low quality chinese imports which use India as a dumping ground to absorb the tremors of the policy change in China’s Energy landscape as has been witnessed since the June 1, 2018 announcement to abolish feed in tariffs to projects connected to the electricity grid post the 31 May deadline.

This reduction in demand from China has lead to an inevitable oversupply of Solar panels in the global market – the pressure of which would likely push prices down 32 percent to 36 percent, more severely than the last cycle in 2016 when prices dropped 28 percent.

Nurturing Indian solar panel manufacturing – which currently represents just over 10% of the local solar module market – is a major priority to help control solar development costs, but domestic manufacturers have been struggling to compete with Chinese firms, both technically and economically.

In the coming years, building domestic capacity and improving the technologies and economies of scale of Indian manufacturers will be a defining issue for solar in India, and therein lies the need for the imposition of a Safeguard Duty to strengthen the fundamentals of India’s Solar Capacity addition.

And while an imposition of any such Safeguard duty will always be a matter of great contention, if it were to be announced – as it is strongly believed it would by 25th July ’18 – the timing could not be more prescient for the following reasons

  • There are no large scale utility projects with commissioning deadlines in Q3-2018, which would be adversely impacted by the immediate imposition of such duties on the import of Panels from China
  • The increase in the landed cost of imported modules would be more or less offset by the steep decline in Solar panel prices which have been witnessed on account of the slowdown in demand in China ensuring that tariffs which had been bid for last year with the price expectation of panels to be at 35 cents would still be financially viable – just without the windfall profits that were being factored in over the past month
  • Expectations of the continual fall in prices due to the overcapacity in China would ensure that projects which have been bid for over the past quarter would also be able to meet their tariff expectations even with the levy of Safeguard Duty – which is expected to be announced as being anywhere between 30-40% on the import of Cells & Modules imported from China

There would undoubtedly be a short term slowdown in demand with the levy of any such Safeguard Duty – but as is with life, there is never a perfect time for an imperfect act. Timing is an invented thing, an inherited trait, and we all have the ability to create the life we want for ourselves.

As our leadership takes on the task of creating a life for India’s Solar industry beyond Chinese imports, they could probably draw inspiration from the oft quoted words of Jawaharlal Nehru and Rabindranath Tagore as India strives to make itself Independent of the economic shackles of globalization.

“Long years ago, we made a tryst with destiny; and now the time comes when we shall redeem our pledge, not wholly or in full measure, but very substantially. At the stroke of the midnight hour, when the world sleeps, India will awake to life and freedom

Into that heaven of freedom, my Father, let my country awake

A group of tech enthusiasts who are tracking latest developments in CleanTech with special focus on Energy Storage and Electric Mobility

About Energy Log Staff

A group of tech enthusiasts who are tracking latest developments in CleanTech with special focus on Energy Storage and Electric Mobility

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