India has proposed to levy a 70 per cent safeguard duty on import of solar power equipment from countries like China for 200 days to protect domestic industry from "serious injury".
The Directorate General of Safeguards in a January 5 recommendation to the finance ministry said solar cells are "being imported into India in such increased quantities and under such conditions so as to cause or threaten to cause serious injury to the domestic industry manufacturing like or directly competitive products."
The existing "critical circumstances" justify the immediate imposition of a provisional Safeguard Duty to save local units from further serious injury, which would be difficult to repair in case the safeguard measure is delayed, it said.
The safeguard duty would be levied if the finance ministry accepts the recommendations of the Directorate General of Safeguards (DGS).
Acting on an application filed by an association of five domestic cell and module makers including Adani Group, DGS recommended "a provisional Safeguard Duty be imposed at the rate of 70 per cent ad valorem on the imports of solar cells whether or not assembled in modules or panels."
It also recommend that the provisional Safeguard Duty be levied for a period of 200 days, "which is considered to be the minimum period of time required to protect the interests of the domestic industry."
Before final duties or import taxes are levied, DGS will hold further investigation into the injury caused by cheap imports. It would also hold a public hearing on the issue.
India has annual manufacturing capacity for solar cells of around 3 gigawatts as against requirement of 20 GW.
DGS said import of solar equipment jumped from 1,271 MW in 2014-15 to 4,186 MW in the next year and to 6,375 MW in 2016-17.
Current fiscal imports are pegged at 9,474 MW as compared to domestic production of 1,164 MW.
"The growth rate of such imports as a percentage of the domestic production was a remarkable 1,371 per cent during the intervening year 2015-16.
"Even the overall growth rate of the imports relative to its domestic production is very significant, rising from 519 per cent in 2014-15 to 814 per cent in 2017-18," it said.
Reasoning its decision, it said while China's exports to India constituted a paltry 1.52 per cent of its total global exports during 2012, this increased to 21.58 per cent during 2016.
During the first half of 2016, Chinese exports to India were 18.51 per cent of its total exports while the combined exports to EU and the US were 30.65 per cent of its total exports.
The situation turned dramatically during the succeeding two half yearly periods. In the second half of 2016, China's exports to India constituted 25.09 per cent while its exports to EU and USA fell to 15.12 per cent.
Again, in the first half of 2017, China's exports to India increased to a staggering 38.77 per cent of its total exports while its exports to EU and the US shrunk to just 5 per cent (of its total exports), it said.
"Such a significant shift in pattern of trade in which China started targeting the Indian market more vigorously as compared to developed countries / markets like EU and USA etc could not have been foreseen," DGS said.
The five domestic manufacturers who had sought imposition of safeguard duty included Adani-backed Mundra Solar PV Ltd, Indosolar Ltd, Jupiter Solar Power Ltd, Websol Energy Systems Ltd and Helios Photo Voltaic Ltd.
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