India and WTO: Safeguard Investigation on Solar Cells

Recently, India notified the WTO’s Committee on Safeguards that it initiated a safeguard investigation on solar cells, whether or not assembled in modules or panels.

India has started this probe to determine imposition of safeguard duty on surging imports of solar cells with a view to protect domestic manufacturers.

Domestic manufacturers have approached the Directorate General of Safeguards (DGS) with a complaint that their market share has remained stagnant despite rapid expansion in demand for solar cells in the country.

Dumping is defined as exporting a product at a price that is lower than the domestic price for the same product. For solar imports, proving dumping may not be difficult as it is common knowledge that Chinese suppliers have been selling modules in India at prices lower than in China.

Unlike anti-dumping duty, a safeguard duty is country agnostic, is imposed on all imports and can be implemented much faster. In a recent precedent, India imposed safeguard duty of 10 per cent on import of specified steel products.

The Directorate General of Safeguards (DGS) has proposed 70% safeguard duty on solar cells and modules imported from China and Malaysia, citing concerns of the domestic industry being damaged on account of increasing solar imports. 

India is targeting to 100 GW (gigawatt) solar capacity by 2022. The current installed capacity is about 15 GW. The government has planned to auction 20 GW capacities by March 2018, and 30 GW each in next two fiscals.

Solar cells, electrical devices that convert sunlight directly into electricity, are imported primarily from China, Malaysia, Singapore and Taiwan.

The application for imposition of the import restrictive duty has been filed by the Indian Solar Manufacturer’s Association (ISMA) on behalf of five Indian producers – Mundra Solar PV, Indosolar, Jupiter Solar Power, Websol Energy Systems and Helios Photo Voltaic. They want safeguard duty on ‘solar cells whether or not assembled in modules or panels’ immediately for four years.

The applicants complained that despite rapid expansion in demand, the sales and market share of the domestic industry has more or less remained constant in recent years. The domestic players had a market share of 13 per cent in 2014-15, which is estimated to decline to 7 per cent during 2017-18.

The domestic industry also asked the DGS for imposition of provisional safeguard duty in view of steep deterioration in the performance of the local players as a result of increased imports of the solar cells.

Photovoltaic solar cells are also known as photovoltaic cells in the market or trade parlance. To make practical use of the solar cells, these are placed in panels or modules.

Safeguard duty is a WTO-compatible temporary measure that is brought in for a certain time-frame to avert any damage to a country’s domestic industry from cheap imports.

What is a safeguard investigation?

A safeguard investigation seeks to determine whether increased imports of a product are causing, or is threatening to cause, serious injury to a domestic industry.

During a safeguard investigation, importers, exporters and other interested parties may present evidence and views and respond to the presentations of other parties.

A WTO member may take a safeguard action (i.e. restrict imports of a product temporarily) only if the increased imports of the product are found to be causing, or threatening to cause, serious injury.

Latest Facts:

China’s huge production and excess capacities of solar cells when faced with hindrances in exports to the EU and USA, had to find an alternative outlet, which they found in India.
While solar cells are imported from China, Malaysia, Singapore and Taiwan, a major quantity of the product is being imported from China. The import volumes of solar cells have increased from 1,275 MW in 2014-15 to 9,474 MW in 2017-18.

This is an increase of 643% in 2017-18 from the base year 2014-15. Moreover, there has been a sudden surge in imports volumes during the first six months of 2017-18 which is 74% of the imports in 2016-17.

While China’s exports to India constituted a paltry 1.52% of its total global exports during 2012, this increased to 21.58% during 2016.

The trend in import volumes strongly suggests that imports of solar cells are likely to increase in future due to excess capacity in China, export orientation of producers in China and opportunities lost by Chinese producers/exporters in other significant markets like USA and EU which would force such producers / exporters to target India.

China is strategically investing in its solar sector and accounts for 60% of the global manufacturing and 40% of the global demand. Now, there is no easy way to compete with the solar sector in China, but making power production more expensive to support uncompetitive manufacturers is not the best available option.