Saturday 25th May 2019

    Dumping the ‘anti-dumping’ duty on solar cells and modules

    Under the Paris Agreement, India has set an ambitious target for clean energy generation through solar power. Prime Minister Narendra Modi has committed to increasing the amount of electric power from clean sources to 40 per cent by 2030. From this, the targeted energy generation from all renewable sources is 175 GW by 2022. As of September 2017, solar power capacity of India is 14.7 GW, accounting for nearly 40 per cent of the energy generation from clean sources. This capacity is estimated to increase to 100 GW by 2022. China is the biggest exporter of solar equipment to India, a trajectory which has been growing since 2012. Specifically in the case of solar cells and modules, India's imports have grown from USD 2.05 million in 2012-13 to USD 4.64 million in 2016-17, showing a growth of 76.25 per cent (Ministry of Commerce). This growth is attributed to the domestic demand for cheaper goods from China and India's need as a market. Read On...

    India is one of the lowest per-capita consumers of electricity in the world, and more than 200 million people are still not connected to cheaper electricity supply. In 2016-17, Indian companies produced an estimated 1.33 GW of modules out of the total capacity of 5.29 GW.

    Recently, an anti-dumping investigation was initiated against products falling under HSN 85414011, namely 'Solar cells, whether or not assembled partially or fully in modules or Panels or glass or some other substrates' originating in or exported from China PR, Taiwan and Malaysia on 21st July 2017. The investigation, initiated by the Directorate General of Anti-Dumping and Allied Duties, was based on an application filed by the Indian Solar Manufacturers Association (ISMA). The association demands imposition of anti-dumping duties on the imports of the said products as the domestic industry is hurting.

    According to the WTO, 'dumping' means export of goods by one country to another market at a price lower than the normal value. The two main parameters used for determination of dumping include the export price and the normal value of the goods in the market of the exporting country. However, in case of the above mentioned investigation, the petitioners have claimed 'normal value' for the solar cells and products on the basis of cost of production in India, duly adjusted on account of selling, general expenses and reasonable profit.

    While the association demands levying of anti-dumping duty, it must also take cognisance of the limitations faced by the Indian solar module manufacturing sector. There is a significant gap between the domestic solar manufacturing capacity and the huge market, which is magnified further by lack of scale, absence of raw materials supply chains and failure to adapt to the rapidly changing technology. This has led to an increase in the cost of domestically produced solar cells and modules. Additionally, the Indian manufacturers can only produce solar cells through the crystalline silicon based solar cell technology while lacking in the thin film technology, which has higher demand. China has the requisite expertise in the latter.

    With the government prioritising cheap power in line with its international commitments, it is necessary to bridge the existing gaps between domestic demand and India's capacity to manufacture solar cells and modules. While the association may be justified in their demand for imposing the anti-dumping duty on the solar cells and modules, the benefits of any such move will be short term and restricted to only a handful of beneficiaries from the manufacturing industry. Such benefits will come at a cost of a larger economic payback that can accrue to the country as a whole. Let me explain; as observed from global trends the economic cost of production for 100 GW of electricity per hour by 2022 using solar energy will perhaps, even without subsidies being given, will be cheaper than the same amount of electricity being produced per hour using the other cheaper but more polluting alternative, coal. Now, if we add to this, the environmental and health costs, which we cannot ignore and which run into billions of rupees per year for the Indian Government and ultimately the Indian taxpayer, there is no compelling case for us to not stay the course as articulated by PM Modi and instead adopt a short term measure like anti-dumping import duty. In the medium to long term, the benefits, economic and environmental, far outweigh all other concerns which are driving the association to demand an anti-dumping duty. The gains that we make can be easily be redistributed through subsidy or other support mechanisms to the small section of manufacturers who may be adversely impacted in the short run.

    - Riya Sinha (TradeBriefs Bureau)

    Views expressed are personal. Riya Sinha is a Researcher at Bureau of Research on Industry and Economic Fundamentals.

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