The debate over anti-dumping duties (ADD) on solar power equipment has reached its peak level, where solar power developers and manufacturer associations are trying to put forward their views to the Government.
The turf war over imposition of anti-dumping duty (ADD) was limited to the fight between solar manufacturers and solar power developers. Now, it has indirectly pulled in two important ministries of the Government of India-Ministry of New and Renewable Energy and the Ministry of Commerce-which are currently at loggerheads. However, as determination of anti-dumping duty is done through standard guidelines put forth by the World Trade Organization (WTO), the recommendations of the Ministry of New and Renewable Energy may not influence the final decision taken by the Ministry of Finance.
Let us look at the larger picture. The need for harnessing solar energy came into focus when India realised that the cost of conventional energy was rising and the Government was not able to ensure the country´s energy security. Through increasing adoption, solar projects are fast becoming cost effective. In the last four years, tariffs have decreased from Rs 17 to approximately Rs 6.5 per unit, thereby closing on to grid parity; correspondingly, installed solar capacity has risen to over 1 GW.
¨If the industry continues to receive support, the cost of solar energy will soon be on the same level as thermal based projects, if not lower,¨ says Vineet Mittal, Vice Chairman Welspun Renewables Energy Pvt Ltd. However, he adds, due to the recent motion of imposing duties on importing generation equipment, the objectives of achieving grid parity and making solar energy affordable might be seriously impeded. According to Solar Power Developers Association (SPDA), with the imposition of anti-dumping duty, there are possible chances of closure of 80 per cent of module manufacturers in the country who import solar cells as raw material, in favour of 10 per cent of module manufacturers (3-4 companies) who import silicon wafers as raw material (despite wafers constituting 60 per cent of value of solar cells).
According to SPDA, the anti-dumping duty (ADD) is in favour of 3-4 companies who have a very small manufacturing capacity to process wafers (about 350 MW per year). It is worth noting that this capacity is not able to meet the requirements currently (since they only make to order and hence run at 50 per cent of the capacity) and will cater to less than 15 per cent of the demand in the future.
Many local module manufacturers seem to have increased exports to other countries in the past two years and are able to compete even in the face of growing foreign module imports, feels Vishwanathan Iyer, DGM & Head - Business Development (Solar), Sterling and Wilson. But a handful of these module manufacturers are trying to make a case that domestic manufacturing overall is unable to compete with cheap imports - which sounds paradoxical.
However, a recent note by the Directorate General of Anti-Dumping and Allied Duties (a copy is in possession with Power Today) has overruled the SPDA arguments. The note says that the domestic industry (constituted by Indosolar Ltd, Websol Energy Systems Ltd and Jupiter Solar Power Limited), had capacity to cater to 30 per cent of domestic demand. However, due to dumped imports, they could not increase their share in the domestic market. Further, besides the domestic industry, there are 39 other domestic producers, who have created adequate capacity to cater to the domestic demand. However, due to dumped imports, these producers had resorted to imports and trading. The immediate impact of the anti-dumping duty would be that about 700 MW solar projects awarded through bidding under Jawaharlal Nehru National Solar Mission (JNNSM) and various State governments would have to be abandoned. According to MNRE, already 1,000 MW has got stranded.
Generation of power by developers is a ¨pass through activity¨ and the ultimate impact is on power distribution companies (mostly Government-owned) and subsequently on energy consumers.
SPDA has assesed that the impact of $0.60 per watt anti-dumping duty on cost of production of power shall be approximately Rs 3 per unit translating to additional project cost of Rs 3 crore/MW. Ergo, considering 20,000 MW targeted production of power in the country as part of the Solar Mission, the proposed anti-dumping duty implies increase in project costs by Rs 60,000 crore, that needs to be borne by distribution companies, the Government or the public in the form of higher cost of power or increased subsidy. This will increase the input cost of industry thus reducing the profitability and possibly productivity of the industry. This will increase the tariff by Rs 3 per unit, taking the price back to Rs 12-13 per unit, making it expensive and significantly shifting the focus from core areas like energy access, rural electrification and reduction of energy poverty.
However, responding to this argument, Indian Solar Manufacturers Association (ISMA) prefers to be more optimistic than realistic. When approached by Power Today, the association said that even after the anti-dumping duty, price of non-subsidised solar power is likely to increase by only 6-8 per cent from the current Rs 7.5 to 8.5 per kilowatt hour (unit).
It is true that the Indian manufacturing story was unable to match the country´s solar PV project demand. In India, between 2010 and 2014, solar PV installations have grown from a few MW to 2 GW. Given this growth, it is expected that the upward trajectory will continue in the forthcoming year as well, with State solar programs in Karnataka, Telangana/Andhra Pradesh, Madhya Pradesh and the Solar Mission, supported by growing excitement among industrial and commercial consumers to venture into purchase of solar power in the private space.
However, though the installation capacity has grown multifold, the manufacturing capacity has been muted. Let´s see a comparative analysis. During 2007 to 2012, China´s solar module manufacturing capacity grew from less than 5 GW to 50 GW at the end of 2012, more than double that of the rest of the world. Whereas, till date, the installed capacity of cell manufacturing in India is 1,216 MW, and the capacity under operation is a mere 240 MW. On the other hand, the installed capacity of manufacturing of modules was 2,348 MW, the capacity under operation was just 661 MW.
Now, with the announcement of of anti-dumping duty recommendations by the Ministry of Commerce, local manufacturers are already working to ramp up manufacturing capacity by 300 MW, according to ISMA.
The association, which represents 25 domestic manufacturers including Tata Solar Power Systems, Moser Baer and others, also said that only 975 MW of solar power projects are pending which could easily be served by domestic manufacturers. Says DT Barki, Director (Technical), Photon Solar, ¨The Indian PV supply chain has sufficient infra to cope up with substantial module (also solar cells) manufacturing capability. The Government should frame policies that favour the solar PV supply chain that fuels manufacturers at large.¨ He adds:
¨We cannot make PV manufacturers go bankrupt and yet expect a solar PV industry boom, as manufacturers form part of the solar PV foundation.¨
The SPDA in its note to the MNRE has said that in the solar power generation value chain, manufacturing accounts for only 30 per cent of jobs while 70 per cent of jobs are generated in downstream activities such as installation, engineering, procurement and construction (EPC), operation & maintainance (O&M), etc. Abandonment, suspension or postponement of planned programs will prevent these jobs being created. Whereas, ISMA is of the view that anti-dumping duties would see the creation of five lakh jobs as Indian manufacturers expand their capacity from the current 700-800 MW annually.
Robinder Sachdev, Director of India Affairs, USIPNAC says, ¨To a large extent USINPAC agrees to the special dispensation that should be accorded to JNNURM projects as these could fall into social objectives, wherein the public interest holds a primacy.¨ These arguments seen to be unending between solar power developers and manufacturers. Everyone (developers and manufacturers) is trying to save their skin. The developers do not want to hamper their capacity addition and manufacturers want their domestic interests saved by the Government. Power Today feels that the Government needs to take a relook at imposition of anti-dumping duty considering envisaged capacity addition. Added to that, even if ADD is imposed, it will be the duty of the Government to keep a stringent check on the quality of manufactured products, which is still lacking. The key to becoming more cost-competitive is for the industry to focus on material choices that can increase the power output and reliable lifetime of solar panels so that higher investment returns can be achieved for the solar energy system.
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