‘Solar duty may do more harm than good’

‘Solar duty may do more harm than good’

News:

1. Recently, the government decided to impose a safeguard duty on the import of solar cells from China and Malaysia.

Important facts:

2. The government implemented a 25% safeguard duty on solar cell imports from China and Malaysia for the period between July 30, 2018 and July 29, 2019.

3. Thereafter, the duty is decrease to 20% for six months following that period, and further to 15% in the subsequent six months.

4. Impacts of this decision:

Positive:

• It could benefit domestic manufacturers.
• The import duty has been placed in order to encourage local solar panel manufactures in the country in a push to the ‘Make in India’ effort.

Negative:

• More than 10,000 MW capacity of solar panels were imported annually from China and Malaysia.
• This application of the safeguard duty would adversely impact the commercial viability of some solar projects.
• The increase tariffs will be ultimately passed on to the customers, hampering the adoption of clean energy.
• The duty does not provide any relief to developers in SEZs.
• Another criticism of the government’s decision is that the period of two years will not be enough to actually benefit domestic manufacturers.
•  ICRA in a report said, tariffs are likely to rise 30-35 paise per unit due to the duty.

5. Other ways to promote the domestic industry:

• The government needs to procure at competitive rates solar power generated from units using domestically manufactured panels.
• Timely approval by the regulators and pass-through of the tariff increase to the off-takers is critical from the cash flow perspective of project developers.
• According to Crisil report, despite the increase in tariffs due to the safeguard duty, solar energy’s cost competitiveness compared with other sources would mean that the sector would not see much slowdown in capacity addition.
• However, the Crisil report, added that there could be some near-term delays in project implementation.